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Partnership penalties and bonuses created by UK welfare programs

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<mark>Journal publication date</mark>2008
<mark>Journal</mark>CESifo Economic Studies
Issue number1
Volume54
Number of pages21
Pages (from-to)1-21
Publication StatusPublished
<mark>Original language</mark>English

Abstract

This article explores how the UK welfare benefit system subsidise or penalise couples for living together as partners. A couple is said to face a “partnership bonus” (“penalty”) if they can receive more (less) benefits when living as partners than when living separately. Using data on existing couples from the Family Resources Survey 1995–2004 we provide a description of the distribution of partnership penalties and bonuses in the population. We also find that, while the 1999 Working Families' Tax Credit reform improved the financial incentives for partnership formation, this effect was largely undone by the subsequent 2003 Working Tax Credit reform.