Do high-income households 'label' family cash transfers? Evidence on family expenditures from Australia

This study examines family expenditures and how they respond to the provision of family cash transfers, particularly among higher-income families. Naming cash benefits with explicit reference to ‘families’ or ‘children’ can nudge households into labelling the extra cash for financial investments in children. Labelling has mainly been assessed among lower-income families. Yet if also higher-income families engage in labelling, family cash benefits might not mitigate stark disparities in child-related investments. Drawing on 2006-2019 data from Household, Income, and Labour Dynamics in Australia (HILDA), the study relies on reforms to Australia’s Family Tax Benefit to ‘reveal’ expenditure responses among higher-income families via an instrumented difference-in-differences design. Higher-income households seem to earmark a family cash transfer for children’s clothing but not for children’s education fees, while they also assign money to adult clothing. Lower-income households, differently, seem to engage in more clear-cut, child-oriented labelling, at the expense of adult-assignable goods. Family cash transfers can nudge households into spending more money on their children across the socioeconomic divide, but not necessarily homogeneously so. Providing more well-off families with transfers can be sustained with limited perverse effects on inequality in family expenditures.