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 to 60% of households with children. The generous child benefit, equal to 10% of monthly average household income, caused an unexpected positive income shock for families with children. This paper investigates how the new child benefit affected household decisions to consume or save the child’s income. Applying the difference-in-differences method and Polish Household Budget Survey data for 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) increased the saving rate by 2.9 percentage points.
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Source: Own calculations based on Polish Household Budget Surveys 2012–2018
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Data Availability
Polish Household Budgets Survey data are owned by Statistics Poland (GUS) and we cannot share them. The data might be obtained directly from Statistics Poland (GUS).
Code Availability
STATA code is available upon request.
Notes
Data for the whole 2016 year bring the 5060 PLN mean income of households with children when excluding the new child benefits of the 2nd, 3rd and 4th quarters of 2016, and 5380 PLN if the new benefits are included. Own calculations based on the HBS data.
The statutory minimum (gross) wage has been increasing each year from 1850 PLN in 2016 to 2250 PLN in 2019. After payments of social contributions and tax, the net minimum wage increased from about 1400 PLN in 2016 to above 1600 PLN in 2019. The eligibility net income threshold was lifted in mid-2019 and the Family 500plus child benefit became fully universal since 1 July 2019.
Child benefits were granted to 3.99 million children in mid-2017 and to 3.74 million children in mid-2018 (Ministry for Family, Labor and Social Policy in Poland, Reports Family 500+ , 2017, 2018). The decline took place even though more children were born than turned 18 in 2017 (in 2018 and 2019 as well). Till 2015, the number of births in Poland was decreasing, and the difference between the number of life births and 18-year-olds was negative each year during 2010–2016 (Population. Statistics Poland, 2021).
Each household fills in a ‘diary of expenses’ for one month. Then, at the end of a quarter, additional questions on large and rare expenses are asked.
This is because Statistics Poland does not provide unique household identifiers that would allow researchers to identify the same households in two subsequent years. In general, we are aware that this may bias the estimates, but we have repeated our analysis on the subsample of “non-panel” households and the main findings hold. These additional results are available from the authors upon request.
The transfer was paid monthly. Since it took some time for the municipalities to distribute payments and some eligible households got their first money (including overdue transfers) not in April, but in May or June, we correct for this issue in our definition of the treatment group, applying income threshold as eligibility criterion also in May and June 2016.
For households with disabled children the eligibility income threshold was PLN 1200 per capita. We assign them to treated and control groups accordingly.
The seasonality that can be seen in Fig. 1 stems from the fact that each year households with children save before summer and then spend money on vacation.
The control group is almost exclusively* composed of households of one child with higher income than in households with more children (the treated group). Households’ incomes are growing fast in the emerging economies, to which Poland belongs, and income growth is a significant factor explaining the relatively high household saving rates in Poland. While savings of the treated group have been pushed up by an extra (mostly) unconditional benefit income, the control group earned and saved according to its life saving patterns. *A tiny group of eligible households did not apply to get the benefit.
In mid-2019 the Polish government made this benefit fully universal, granted to all children. The analysis presented in this paper focuses on time period 2012–2018.
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Acknowledgements
The paper was presented at CEST Colloquium on 10-11 October 2018 at Pace University, New York, the 2nd RCEA Warsaw Money-Macro-Finance Conference at the University of Warsaw on 10-11 May 2019 and the Ninth ECINEQ Meeting on 8-10 July 2021, online. We are grateful to the participants of the conferences for valuable comments and discussion.
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Liberda, B., Sałach, K. & Pęczkowski, M. The Effects of Child Benefit on Household Saving. J Fam Econ Iss 44, 447–460 (2023). https://doi.org/10.1007/s10834-022-09834-3
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DOI: https://doi.org/10.1007/s10834-022-09834-3