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Who Benefits from Child Benefit?


  • 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)


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

    1. John Micklewright, 2003. "Child Poverty in English-Speaking Countries," Papers inwopa03/25, Innocenti Working Papers, revised 2003.
    2. Gary S. Becker & Nigel Tomes, 1994. "Human Capital and the Rise and Fall of Families," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 257-298 National Bureau of Economic Research, Inc.
    3. Shea, John, 2000. "Does parents' money matter?," Journal of Public Economics, Elsevier, vol. 77(2), pages 155-184, August.
    4. 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.
    5. 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, June.
    6. 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.
    7. Phipps, Shelley A & Burton, Peter S, 1998. "What's Mine Is Yours? The Influence of Male and Female Incomes on Patterns of Household Expenditure," Economica, London School of Economics and Political Science, vol. 65(260), pages 599-613, November.
    8. Jacoby, Hanan, 1997. "Is there an intrahousehold 'flypaper effect'?," FCND discussion papers 31, International Food Policy Research Institute (IFPRI).
    9. 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)


    Blog mentions

    As found by, 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


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    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. Johannes Abeler & Felix Marklein, 2017. "Fungibility, Labels, and Consumption," Journal of the European Economic Association, European Economic Association, vol. 15(1), pages 99-127.
    3. repec:spr:empeco:v:53:y:2017:i:2:d:10.1007_s00181-016-1134-0 is not listed on IDEAS
    4. 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, Department of Economics, University of Bristol, UK.
    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. repec:kap:reveho:v:15:y:2017:i:3:d:10.1007_s11150-015-9291-z is not listed on IDEAS
    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. Kerris Cooper & Kitty Stewart, 2017. "Does Money Affect Children’s Outcomes? An update," CASE Papers /203, Centre for Analysis of Social Exclusion, LSE.
    10. 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, November.
    11. Simpson, Nicole B., 2013. "Families, Taxes and the Welfare System," IZA Discussion Papers 7369, Institute for the Study of Labor (IZA).
    12. Sonia Bhalotra, 2004. "Early Childhood Investments in Human Capital: Parental Resources and Preferences," Bristol Economics Discussion Papers 04/562, Department of Economics, University of Bristol, UK.
    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, Department of Economics, University of Bristol, UK.

    More about this item


    altruism; child poverty; intra-household transfers;

    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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