Home > Research > Publications & Outputs > Who benefits from child benefit?
View graph of relations

Who benefits from child benefit?

Research output: Contribution to journalJournal articlepeer-review

Published
Close
<mark>Journal publication date</mark>01/2012
<mark>Journal</mark>Economic Inquiry
Issue number1
Volume50
Number of pages18
Pages (from-to)153-170
Publication StatusPublished
<mark>Original language</mark>English

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. (JEL I38, D79, D12)