Abstract
We examine the causal relationship between child benefits and household spending on child and adult goods. In particular, we examine whether it matters if it is the husband or wife who controls this income transfer. We exploit the introduction of child benefits to families with at least four children. The law assigned the mother as the beneficiary but, when asked who collected the amount, one-third of beneficiary families reported the father as the recipient. We use the propensity score matching approach to assess the issue of possible self-selection of beneficiary families into answering who was the recipient parent and the results favour common support. We apply the difference-in-difference approach and find evidence in favour of a gender bias in the spending of child benefits. On average, after the reform, recipient families’ spending on child clothing, food and tobacco was significantly different from that of non-recipient families. Further analysis suggests that recipient families with the mother (father) in control of the amount spent more on child clothing and food (tobacco) relative to non-recipient families. The evidence has implications on the design of welfare programmes to benefit the children.
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Notes
The existence of a labelling effect is consistent with individual psychological and behavioural anomalies, like narrow bracketing or mental accounting (Tversky and Kahnemann 1981).
Hines and Thaler (1995) provide a review of the literature on the flypaper hypothesis.
These models recognize that members of the household (i.e. husband and wife) may have different preferences due to gender-specific psychological and/or behavioural differences.
The data has been used by other empirical studies, including Lyssiotou (2008) to identify flexible equivalence scales that capture the distributional effects of inflation from two cross sections of FES data.
The additional instruments are chosen in the following way. First, we exploit the degree of correlation between the additional instruments and the endogenous regressor, conditional on the other covariates, and test for weak instruments. Second, we test the validity of the additional instruments by computing the Hansen’s statistic along with its probability under the null hypothesis that the overidentifying restrictions of the model are valid.
The difference in the effects of younger and older children on children’s, women’s and men’s clothing is most probably because the parents may have reported the expenditure on clothing for older children as adult clothing.
These effects capture differences in household size, the number and ages of the children, other demographics and the level of household expenditure.
Research on financial arrangements within families distinguishes between financial control and management. Control is taken to imply decision making while management is taken to imply implementation of these decisions. In couple households there is a significant association between control over household finances and more general power within the household (Volger and Pahl 1993).
These variables are known as distributional factors and affect the household members’ bargaining position but not preferences or the joint budget set. Their significance, in affecting household expenditure patterns, provides support for non-unitary models of household behaviour and the non-pooling of spouses’ incomes.
These are kernel density estimates. The choice of the bandwidth parameter does not affect the results regarding common support.
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Acknowledgements
I am very grateful to the Editors-in-Chief, Prof. Ronald B. Davies and Prof. Kimberley Scharf, for their very valuable comments and suggestions. I would like to thank the University of Cyprus for financial support and the Department of Statistics and Research of Cyprus for making available the Family Expenditure Survey data. I am solely responsible for the interpretation of the data and all errors.
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Lyssiotou, P. Gender bias in the spending of child benefits: evidence from a natural policy reform. Int Tax Public Finance 25, 1029–1070 (2018). https://doi.org/10.1007/s10797-017-9477-9
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DOI: https://doi.org/10.1007/s10797-017-9477-9
Keywords
- Child benefits
- Public policy
- Household expenditure behaviour
- Intrafamily allocation
- Welfare
- Recipient and labelling hypotheses