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The Effects of In‐Work Benefit Reform in Britain on Couples: Theory and Evidence

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  • Marco Francesconi
  • Helmut Rainer
  • Wilbert Van Der Klaauw

Abstract

This article develops a simple model of household decisions that explicitly accounts for the role played by the Working Families’ Tax Credit (WFTC) to examine its effects on couples in Britain. The main implications of the model are tested using panel data from the British Household Panel Survey collected between 1991 and 2002. Overall, the financial incentives of the reform had small and statistically insignificant effects on a wide range of married mothers’ decisions. Women’s responses, however, were highly heterogeneous, depending on their partners’ labour supply and earnings.

Suggested Citation

  • Marco Francesconi & Helmut Rainer & Wilbert Van Der Klaauw, 2009. "The Effects of In‐Work Benefit Reform in Britain on Couples: Theory and Evidence," Economic Journal, Royal Economic Society, vol. 119(535), pages 66-100, February.
    • Handle: RePEc:wly:econjl:v:119:y:2009:i:535:p:f66-f100
    DOI: 10.1111/j.1468-0297.2008.02225.x
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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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