Who benefits from child benefit?

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Title: Who benefits from child benefit?
Authors: Blow, Laura
Walker, Ian
Zhu, Yu
Permanent link: http://hdl.handle.net/10197/1834
Date: 8-Jun-2007
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.
Funding Details: Her Majesty's Treasury's Evidence Based Policy Fund
Type of material: Working Paper
Publisher: University College Dublin. Geary Institute
Series/Report no.: UCD Geary Institute Discussion Paper Series; WP/16/2007
Keywords: AltruismChild povertyIntra-household transfers
Subject LCSH: Family allowances
Child welfare
Transfer payments
Households--Economic aspects
Other versions: http://www.ucd.ie/geary/static/publications/workingpapers/GearyWp200716.pdf
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Geary Institute Working Papers

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