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The effects of child benefit on household saving

Author

Listed:
  • Barbara Liberda

    (Faculty of Economic Sciences, University of Warsaw)

  • Katarzyna Sałach

    (Faculty of Economic Sciences, University of Warsaw)

  • Marek Pęczkowski

Abstract

In 2016, a new child benefit was introduced in Poland: a universal benefit for the second and subsequent children in a family and means tested for the first child. Substantial transfers of the new child benefit were granted 60% of households with children. The generous child benefit, equal to 10% of monthly median households’ income, caused an unexpected positive income shock for families with children. In this paper, we investigate how the new child benefit affects the household decisions to consume or save the child's income. Applying the difference-in-differences method and Polish Household Budget Survey data for the years 2012-2018, we find a positive effect of the child benefit on household saving. Our estimates indicate that families obtaining the child benefit (treatment group) increased the saving rate by 8 percentage points after the child benefit reform in 2016. Over time, the control group (not obtaining the child benefit) raised the saving rate by 2.9 percentage points.

Suggested Citation

  • Barbara Liberda & Katarzyna Sałach & Marek Pęczkowski, 2021. "The effects of child benefit on household saving," Working Papers 2021-02, Faculty of Economic Sciences, University of Warsaw.
    • Handle: RePEc:war:wpaper:2021-02
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    References listed on IDEAS

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    More about this item

    Keywords

    households; income; child benefit; saving;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • P36 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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