tag:blogger.com,1999:blog-38545607.post8383772907000018193..comments2024-03-09T10:26:48.789+00:00Comments on economics, psychology, policy: The Economics of Child BenefitEmma Watsonhttp://www.blogger.com/profile/11466193733741012673noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-38545607.post-5333199076912045082011-11-23T16:17:51.330+00:002011-11-23T16:17:51.330+00:00Thanks for that Martin. Both now on the reading li...Thanks for that Martin. Both now on the reading list. I asked as short lit review at the end of this piece (http://www2.warwick.ac.uk/fac/soc/economics/staff/academic/walker/current_research/method_review.pdf) by Blow & Walker & others seemed to suggest that there was little evidence for any significant effect of income on child outcomes. Of course they weren't looking at specific scheme or transfer, but happened to read your post and that at the same time.<br /><br />Thanks for the papers.Barranoreply@blogger.comtag:blogger.com,1999:blog-38545607.post-75175807153134709022011-11-22T22:41:44.605+00:002011-11-22T22:41:44.605+00:00Barra,
Another paper has come to my attention fro...Barra,<br /><br />Another paper has come to my attention from the empirical literature on the effect of child benefit on outcomes. Last month, the IZA released the following discussion paper: <a href="http://ftp.iza.org/dp5994.pdf" rel="nofollow">The Effects of a Universal Child Benefit</a>. It's by Libertad González at UPF Barcelona; and an abridged abstract is below. <br /><br />"I study the impact of a universal child benefit on fertility and family well-being. I exploit the unanticipated introduction of a new, sizeable, unconditional child benefit in Spain in 2007, granted to all mothers giving birth on or after July 1, 2007. The regression discontinuity-type design allows for a credible identification of the causal effects. I find that the benefit did lead to a significant increase in fertility, as intended, part of it coming from an immediate reduction in abortions. On the unintended side, I find that families who received the benefit did not increase their overall expenditure or their consumption of directly child-related goods and services. Instead, eligible mothers stayed out of the labor force significantly longer after giving birth, which in turn led to their children spending less time in formal child care".<br /><br />As it happens, the Spanish child benefit was removed in May 2010 (in effect for births starting January 2011), as part of broader budget cuts. Of course, what is particularly different about this case is that there was an explicit policy objective to increase fertility. Somebody should forward this paper on to Michael O'Leary.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-38545607.post-68808727141507885512011-11-22T19:08:59.099+00:002011-11-22T19:08:59.099+00:00Barra, thanks for the feedback.
You raise an int...Barra, thanks for the feedback. <br /><br />You raise an interesting point. It's one that I didn't cover in the main post as I was focused on the debate between means-testing and universality; suggestions for a non-universal approach that would not involve means-testing; and other issues, such as household economies of scale.<br /><br />However, I did read some of the literature that you would be interested in, yesterday. David Madden (from the School of Economics at UCD) has done some <a href="http://irserver.ucd.ie/dspace/bitstream/10197/767/1/maddend_workpap_013.pdf" rel="nofollow">relevant research</a>: that I cited in the main post. I didn't mention this conclusion from Madden's paper though: <br /><br />"...Child benefit may not directly combat child poverty, in the sense that it appears that the extent to which children do relatively better out of child benefit is greater amongst better-off families. Once again, this finding should be interpreted with caution. While children in better off families may do relatively better from child benefit than those in poor families this does not imply that children in poor families do not gain from child benefit, nor that it does not alleviate child poverty in these families. Overall, while the results presented in this paper are relatively tentative, they do suggest that child benefit is successful in that it does help children."<br /><br />So while it may be the case that child benefit is good for *all* children (to some extent); it seems that children from better-off families benefit more. This can be used as motivation to target child benefit towards children from worse-off families; if one believes that child benefit primarily exists to help those children who are worse-off. <br /><br />In the current situation in Ireland (where a €3.8 billion adjustment must be made in the upcoming Budget), I think it would be fairest to end the universal provision of child care rather than have a cut in the benefit right across the board. <br /><br />Another research paper ("Who Benefits from Child Benefit?"), by <a href="http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/publications/twerp_749.pdf" rel="nofollow">Blow, Walker and Zhu</a> (2006) suggests that (universal) child benefit may simply finance spending on children that would have otherwise occurred. So we are into the territory of "deadweight loss". The taxpayer spends a lot of money without creating all that much additional child-welfare. Unless the benefit scheme could be targeted, of course.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-38545607.post-42961560670096610122011-11-22T17:25:17.665+00:002011-11-22T17:25:17.665+00:00Ronan, thanks for the feedback.
On whether child ...Ronan, thanks for the feedback.<br /><br />On whether child benefit could indeed be taxed, I just read this afternoon in the <a href="http://www.irishtimes.com/newspaper/ireland/2011/1122/1224307949382.html" rel="nofollow">Irish Times</a> that:<br /><br />"An advisory group established by her (Joan Burton) earlier this year to examine ways of mean-testing or taxing the benefit has concluded in a preliminary indication that taxing the benefit is not possible. Its full report is not due out until March 2012."<br /><br />I'm looking forward to reading that report in full next year. As far as I am aware, the Commission on Taxation thought that it would have been possible to tax child benefit. I know particular issues can arise though - once one sits down to map out an implementation-strategy. <br /><br />For now, the preliminary report of Burton's advisory group would seem to leave the medical card option as the only remaining possibility for reform. Of course, this would have to involve a link between the computer systems in the HSE and the systems in the Department of Social Protection. <br /><br />With respect to logistical IT issues, <a href="http://www.csi.ucd.ie/users/joe-carthy" rel="nofollow">Joe Carthy</a>, from the UCD School of Computer Science and Informatics, was on NewsTalk radio before lunch-time today: suggesting that it was very much possible to make the systems at Revenue and Social Protection "talk to each other". Carthy suggests that he could set this up easily himself within a month, for a small fee. So "computer says no" should not be trotted out as an excuse in the report due out next March.<br /><br />In the UK, it is the same body, Revenue and Customs, which "both dishes out child benefit and collects income tax, (so it) could readily identify these families." From <a href="http://www.economist.com/blogs/blighty/2010/10/taking_child_benefit_away_richer_families" rel="nofollow">The Economist</a>, about a year ago.<br /><br />Finally, even if child benefit remains outside the system of taxation, there are still ways to make the trade-off being working and welfare stack up so that there is always an incentive to take up a job. When Osborne made his announcement about a clawback in child-benefit last year, he also revealed that the total state benefits one family can claim in future will be capped at about £26,000 per annum. "This will mean that no family on welfare will be better off than one earning an average income from work, the chancellor said." From <a href="http://www.bbc.co.uk/news/uk-politics-11464300" rel="nofollow">the BBC</a>. <br /><br />A cap on annual family benefits here in Ireland might allay some of your concerns.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-38545607.post-72391665167465683832011-11-22T09:45:14.497+00:002011-11-22T09:45:14.497+00:00Good post. What's your reading of the empirica...Good post. What's your reading of the empirical literature on the effect of child benefit on outcomes, the main motivation behind the huge increases in child benefit being to improve these? Unless the reason is to incentivise people to have childen, and the Iona institute secretly define government policy.Barranoreply@blogger.comtag:blogger.com,1999:blog-38545607.post-59826583804342436822011-11-22T09:02:20.870+00:002011-11-22T09:02:20.870+00:00The problem with the medical card option, and inde...The problem with the medical card option, and indeed with anything that leaves social welfare outside the tax net, is that it further entrenches the borders between the working and the welfare.<br /><br />If all social welfare payments are made part of taxable income, i.e. not self-assessment or opt-in but rather a bit of joined up thinking between Revenue and Social Protection, that destroys the borders between someone who earns €25,000 through working and someone gifted €25,000 by the State.Ronan Lyonshttps://www.blogger.com/profile/11722923273472116173noreply@blogger.com