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Who Benefits from Child Benefit?

Author

Listed:
  • Laura Blow

    (Institute for Fiscal Studies, 7 Ridgemount Street, London, WC1E 7AE, Uk)

  • Ian Walker

    (Department of Economics, University of Warwick, Coventry, CV4 7AL, UK)

  • Yu Zhu

    (Department of Economics, University of Kent, Canterbury, CT2 7NP, UK)

Abstract

Governments, over much of the developed world, make significant financial transfers to parents with dependent children. For example, in the US the recently introduced Child Tax Credit (CTC), which goes to almost all children, costs almost $1billion each week, or about 0.4% of GNP. The UK has even more generous transfers and spends about $25 a week on each of about 8 million children – about 1% of GNP. The typical rationale given for these transfers is that they are good for our children and here we investigate the effect of such transfers on household spending patterns. The UK is an excellent laboratory to address this issue because such transfers, known as Child Benefit (CB) have been simple lump sum universal payments for a continuous period of more than 20 years. We do indeed find that CB is spent differently from other income – paradoxically, it appears to be spent disproportionately on adult-assignable goods. In fact we estimate that as much as half of a marginal pound of CB is spent on alcohol. We resolve this puzzle by showing that the effect is confined to unanticipated variation in CB so we infer that parents are sufficiently altruistic towards their children that they completely insure them against shocks.

Suggested Citation

  • Laura Blow & Ian Walker & Yu Zhu, 2007. "Who Benefits from Child Benefit?," Working Papers 200716, Geary Institute, University College Dublin.
  • Handle: RePEc:ucd:wpaper:200716
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Who really gets child benefit?
      by chris dillow in Stumbling and Mumbling on 2010-10-05 17:24:34
    2. Pregnancy pay-out nonsense
      by chris dillow in Stumbling and Mumbling on 2007-09-10 14:43:53

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    Cited by:

    1. Angus Holford, 2015. "The labour supply effect of Education Maintenance Allowance and its implications for parental altruism," Review of Economics of the Household, Springer, vol. 13(3), pages 531-568, September.
    2. Christian Raschke, 2016. "The Impact of the German Child Benefit on Household Expenditures and Consumption," German Economic Review, Verein für Socialpolitik, vol. 17(4), pages 438-477, November.
    3. Johannes Abeler & Felix Marklein, 2017. "Fungibility, Labels, and Consumption," Journal of the European Economic Association, European Economic Association, vol. 15(1), pages 99-127.
    4. Mari, Gabriele & Keizer, Renske, 2021. "Do high-income households 'label' family cash transfers? Evidence on family expenditures from Australia," SocArXiv ucyzb, Center for Open Science.
    5. Olivier Bargain & Olivier Donni, 2007. "A Theory of Child Targeting," Working Papers 200710, Geary Institute, University College Dublin.
    6. Beatty, Timothy K.M. & Blow, Laura & Crossley, Thomas F. & O'Dea, Cormac, 2014. "Cash by any other name? Evidence on labeling from the UK Winter Fuel Payment," Journal of Public Economics, Elsevier, vol. 118(C), pages 86-96.
    7. Anna Baranowska-Rataj & Xavier de Luna & Anneli Ivarsson, 2016. "Does the number of siblings affect health in midlife? Evidence from the Swedish Prescribed Drug Register," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 35(43), pages 1259-1302.
    8. Lange, Ian & Moro, Mirko & Rahman, Mohammad, 2014. "Policy Labels and Investment Decision-making," Stirling Economics Discussion Papers 2014-01, University of Stirling, Division of Economics.
    9. Shun-ichiro Bessho, 2018. "Child Benefit, Tax Allowances and Behavioural Responses: The Case of Japanese Reform, 2010–2011," The Japanese Economic Review, Springer, vol. 69(4), pages 478-501, December.
    10. Wang, Julia Shu-Huah & Zhang, Jinbao & Fu, Tsung-Hsi, 2021. "The effects of universal child allowance on family expenditure in Taiwan," Children and Youth Services Review, Elsevier, vol. 129(C).
    11. Mari, Gabriele & Keizer, Renske, 2020. "Families of Austerity: Welfare Cuts and Family Stress in Britain," SocArXiv vdej8, Center for Open Science.
    12. Cooper, Kerris & Stewart, Kitty, 2020. "Does household income affect children’s outcomes? A systematic review of the evidence," LSE Research Online Documents on Economics 107029, London School of Economics and Political Science, LSE Library.
    13. Kim, S, 1977. "Instability Of Primary Exports, Income Stabilisation Policies And Welf Are," Working Papers 11, University of Sydney, School of Economics.
    14. Sonia Bhalotra, 2004. "Parent Altruism, Cash Transfers and Child Poverty," Bristol Economics Discussion Papers 04/561, School of Economics, University of Bristol, UK.
    15. Cooper, Kerris & Stewart, Kitty, 2017. "Does Money Affect Children’s Outcomes? An update," LSE Research Online Documents on Economics 103494, London School of Economics and Political Science, LSE Library.
    16. Rajat Deb, 2016. "Determinants of Savings in Sukanya Samriddhi Account: Evidence from Tripura," IIM Kozhikode Society & Management Review, , vol. 5(2), pages 120-140, July.
    17. Panayiota Lyssiotou, 2018. "Gender bias in the spending of child benefits: evidence from a natural policy reform," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(4), pages 1029-1070, August.
    18. Panayiota Lyssiotou, 2017. "The impact of targeting policy on spouses’ demand for public goods, labor supplies and sharing rule," Empirical Economics, Springer, vol. 53(2), pages 853-878, September.
    19. Paul Gregg & Jane Waldfogel & Elizabeth Washbrook, 2005. "Expenditure Patterns Post-Welfare Reform in the UK: Are Low-Income Families Starting to Catch Up?," The Centre for Market and Public Organisation 05/119, The Centre for Market and Public Organisation, University of Bristol, UK.
    20. Timo Hener, 2017. "Effects of labeled child benefits on family savings," Review of Economics of the Household, Springer, vol. 15(3), pages 759-777, September.
    21. Kerris Cooper & Kitty Stewart, 2017. "Does Money Affect Children's Outcomes? An update," CASE Papers /203, Centre for Analysis of Social Exclusion, LSE.
    22. Kerris Cooper & Kitty Stewart, 2021. "Does Household Income Affect children’s Outcomes? A Systematic Review of the Evidence," Child Indicators Research, Springer;The International Society of Child Indicators (ISCI), vol. 14(3), pages 981-1005, June.
    23. Simpson, Nicole B., 2013. "Families, Taxes and the Welfare System," IZA Discussion Papers 7369, Institute of Labor Economics (IZA).
    24. Sonia Bhalotra, 2004. "Early Childhood Investments in Human Capital: Parental Resources and Preferences," Bristol Economics Discussion Papers 04/562, School of Economics, University of Bristol, UK.
    25. Michael Malcolm, 2013. "Preferences and Policies: An Intra-Household Demand System," Economic Papers, The Economic Society of Australia, vol. 32(1), pages 67-80, March.

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    More about this item

    Keywords

    altruism; child poverty; intra-household transfers;
    All these keywords.

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • D79 - Microeconomics - - Analysis of Collective Decision-Making - - - Other
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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