Blow, Laura, Walker, Ian and Zhu, Yu. (2012) Who benefits from child benefit? Economic Inquiry, Vol.50 (No.1). pp. 153-170. ISSN 0095-2583

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Abstract

Governments, over much of the developed world, make significant financial transfers to parents with dependent children. For example, in the United States the recently introduced Child Tax Credit (CTC), which goes to almost all children, costs almost $1 billion each week, or about 0.4% of GNP. The United Kingdom has even more generous transfers and spends an average of about $30 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. In the United Kingdom 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 dollar 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 toward their children that they completely insure them against shocks.

Item Type:	Journal Article
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HQ The family. Marriage. Woman
Divisions:	Faculty of Social Sciences > Economics
Journal or Publication Title:	Economic Inquiry
Publisher:	Wiley-Blackwell Publishing, Inc.
ISSN:	0095-2583
Date:	January 2012
Volume:	Vol.50
Number:	No.1
Number of Pages:	18
Page Range:	pp. 153-170
Identification Number:	10.1111/j.1465-7295.2010.00348.x
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Open Access
Funder:	Her Majesty’s Treasury’s Evidence Based Policy Fund, Department for Education and Skills, Department of Work and Pensions, Department of Culture, Media and Sports, Inland Revenue, Leverhulme Trust
URI:	http://wrap.warwick.ac.uk/id/eprint/45622

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