Working Paper: NBER ID: w19007
Authors: Richard Blundell; Monica Costa Dias; Costas Meghir; Jonathan M. Shaw
Abstract: We estimate a dynamic model of employment, human capital accumulation - including education, and savings for women in the UK, exploiting tax and benefit reforms, and use it to analyze the effects of welfare policy. We find substantial elasticities for labor supply and particularly for lone mothers. Returns to experience, which are important in determining the longer-term effects of policy, increase with education, but experience mainly accumulates when in full-time employment. Tax credits are welfare improving in the UK and increase lone-mother labor supply, but the employment effects do not extend beyond the period of eligibility. Marginal increases in tax credits improve welfare more than equally costly increases in income support or tax cuts.
Keywords: female labor supply; human capital; welfare reform; tax credits; labor supply elasticity
JEL Codes: H2; H3; I21; J22; J24; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax credits (H29) | Labor supply of lone mothers (J22) |
| Tax credits (H29) | Overall welfare in the UK (I31) |
| Labor supply of lone mothers (J22) | Human capital accumulation (J24) |
| Tax credits (H29) | Employment effects of mothers once eligibility ceases (J65) |
| Parental liquidity shocks at age 16 (D14) | Educational attainment (I21) |
| Tax credits (H29) | Employment post-eligibility (J68) |
| Tax credits (H29) | Labor supply among lone mothers (J22) |