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Welfare and economic implications of universal child benefits

Author

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  • Aleksandra Kolasa

    (University of Warsaw, Faculty of Economic Sciences)

Abstract

Universal child benefits are an important component of the social protection systems in many developed economies, particularly in Europe. When evaluating their impact, most studies tend to focus primarily on the empirical evidence and short-term effects. However, given their large-scale implementation, such programs can have sizable general equilibrium effects. The aim of this paper is to study the long-run implications of universal child benefits within a theoretical framework that can capture the complexities of household decisions regarding consumption, labor participation, and the timing of children. To this end, I develop an overlapping generations model with idiosyncratic earnings risk, infertility shocks, and endogenous temporal fertility. According to the model simulations, universal child benefits lead to a reduction in the spacing between children and, on average, lower maternal age at childbirth for all births. This, in turn, alleviates some of the negative aggregate effects typically associated with redistributive policies, but has a detrimental impact on the average quality of children. Finally, universal child benefits increase ex-ante welfare by 0.42% of lifetime adult consumption, significantly outperforming broad-based transfer policies not tied to the number of children.

Suggested Citation

  • Aleksandra Kolasa, 2024. "Welfare and economic implications of universal child benefits," Working Papers 2024-04, Faculty of Economic Sciences, University of Warsaw.
  • Handle: RePEc:war:wpaper:2024-04
    as

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    File URL: https://www.wne.uw.edu.pl/download_file/4023/0
    File Function: First version, 2024
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    References listed on IDEAS

    as
    1. Michael Baker & Derek Messacar & Mark Stabile, 2023. "Effects of Child Tax Benefits on Poverty and Labor Supply: Evidence from the Canada Child Benefit and Universal Child Care Benefit," Journal of Labor Economics, University of Chicago Press, vol. 41(4), pages 1129-1182.
    2. Elizabeth Ananat & Benjamin Glasner & Christal Hamilton & Zachary Parolin, 2022. "Effects of the Expanded Child Tax Credit on Employment Outcomes: Evidence from Real-World Data from April to December 2021," NBER Working Papers 29823, National Bureau of Economic Research, Inc.
    3. Helmut Rainer & Stefan Bauernschuster & Natalia Danzer & Anita Fichtl & Timo Hener & Christian Holzner & Janina Reinkowski, 2014. "Child Benefit and Child Allowances in Germany: Their Impact on Family Policy Goals," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(1), pages 37-45, 04.
    4. Patricia Cortés & Jessica Pan, 2020. "Children and the Remaining Gender Gaps in the Labor Market," NBER Working Papers 27980, National Bureau of Economic Research, Inc.
    5. repec:ces:ifodic:v:12:y:2014:i:1:p:19108857 is not listed on IDEAS
    6. Helmut Rainer & Stefan Bauernschuster & Natalia Danzer & Anita Fichtl & Timo Hener & Christian Holzner & Janina Reinkowski & Anita Dietrich, 2014. "Child Benefit and Child Allowances in Germany: Their Impact on Family Policy Goals," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(01), pages 37-45, April.
    7. Cortes, Patricia & Pan, Jessica, 2020. "Children and the Remaining Gender Gaps in the Labor Market," IZA Discussion Papers 13759, Institute of Labor Economics (IZA).
    8. Sommer, Kamila, 2016. "Fertility choice in a life cycle model with idiosyncratic uninsurable earnings risk," Journal of Monetary Economics, Elsevier, vol. 83(C), pages 27-38.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    universal child benefits; infertility risk; temporal fertility; social welfare; general equilibrium models;
    All these keywords.

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

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