Effects of labeled child benefits on family savings

Timo Hener

Review of Economics of the Household, 2017, vol. 15, issue 3, No 3, 759-777

Abstract: Abstract Contrary to standard microeconomic principles, it is by now well understood that income is not fungible. For example, the label of a government transfer can induce individuals to make expenditure decisions that are skewed towards the label. In this paper, I show that child benefits are disproportionately used for savings assignable to children. I exploit a policy reform in a difference-in-differences approach to estimate the effect of child benefits on savings. The results suggest a significant positive effect on long-term savings and weak evidence for effects on child-assignable consumption. I conclude that labeling effects should be considered carefully by policy makers, if not for nudging individuals, then to avoid affecting decisions unintentionally.

Keywords: Mental accounting; Labeling effects; Child benefits; Savings (search for similar items in EconPapers)
JEL-codes: D01 D12 I38 J18 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s11150-015-9291-z

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