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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

    as
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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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