Who Benefits from Child Benefit?
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.
|Date of creation:||08 Jun 2007|
|Contact details of provider:|| Postal: Arts Annexe, Belfield, Dublin 4|
Phone: +353 1 7164615
Fax: +353 1 7161108
Web page: http://www.ucd.ie/geary/
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John Micklewright, 2003.
"Child Poverty in English-Speaking Countries,"
inwopa03/25, Innocenti Working Papers, revised 2003.
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- John Shea, 1997. "Does Parents' Money Matter?," NBER Working Papers 6026, National Bureau of Economic Research, Inc.
- Janet Currie, 1994. "Welfare and the Well-Being of Children: The Relative Effectiveness of Cash and In-Kind Transfers," NBER Chapters,in: Tax Policy and the Economy, Volume 8, pages 1-44 National Bureau of Economic Research, Inc.
- Janet Currie, 1993. "Welfare and the Well-Being of Children: The Relative Effectiveness of Cash and In-Kind Transfers," NBER Working Papers 4539, National Bureau of Economic Research, Inc.
- Richard Dickens & David T Ellwood, 2003. "Child Poverty in Britain and the United States," Economic Journal, Royal Economic Society, vol. 113(488), pages 219-239, 06.
- Keen, Michael, 1986. "Zero Expenditures and the Estimation of Engel Curves," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(3), pages 277-286, July.
- Bergstrom, Theodore C, 1989. "A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1138-1159, October. Full references (including those not matched with items on IDEAS)