Income effects and labour supply: evidence from a child benefits reform

Mathias Fjællegaard Jensen and Jack Blundell

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: In this paper, we exploit a unique and unexpected reform to the child benefit system in Denmark to assess the effects of child benefits on parental labour supply. A cap on child benefit payments in 2011 led to a non-negligible reduction in child benefits for larger families with young children while leaving child benefits for smaller families unchanged. The differential impact of this policy represents an opportunity to assess the causal impact of child benefit programmes on the labour supply of mothers and fathers. Using a difference-in-differences strategy, we find that the reduction in benefits leads to a substantial increase in the labour supply of mothers. Mothers respond to the policy at both the intensive and extensive margins, with the latter outweighing the former, and the effect persists after controlling for fertility-related family characteristics. To fix preferences for additional children across treatment and control groups, we use data on parents’ medical consultations on sterilisation, a common procedure in Denmark.

Keywords: child benefits; gender differences; labour supply (search for similar items in EconPapers)
JEL-codes: H24 J13 J16 J18 J22 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2023-12-20
New Economics Papers: this item is included in nep-eur
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Published in Journal of Public Economics, 20, December, 2023, 230. ISSN: 0047-2727

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:121357

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