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The effects of child benefit on household saving

Barbara Liberda (), Katarzyna Sałach () and Marek Pęczkowski

No 2021-02, Working Papers from Faculty of Economic Sciences, University of Warsaw

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.

Keywords: households; income; child benefit; saving (search for similar items in EconPapers)
JEL-codes: D14 G51 I38 P36 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2021
New Economics Papers: this item is included in nep-cwa, nep-eur and nep-tra
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Handle: RePEc:war:wpaper:2021-02