ABSTRACT
This paper provides new evidence on the relationship between single mothers’ tax credit eligibility and early child development in Britain. Tax credit eligibility is considered as a form of family input in generating children’s production function to the extent that eligibility may induce changes in income, maternal time input and childcare usage. Using data from the UK Millennium Cohort Study (MCS), this study finds no relationship between mothers’ entitlements to tax credits and children’s cognitive and non-cognitive outcomes compared to the children of welfare mothers.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes
1 In April 2003, the Work Tax Credit and Child Tax Credit (WTC/CTC) were introduced and replaced the WFTC, while the main features of WFTC remained. This paper considers WTC/CTC reform as a pure successor of the WFTC for the following reasons. First, the WTC/CTC was not primarily driven by strengthening work incentives, and much of the policy attention focused on improving administrative efficiency (Brewer and Hoynes Citation2019). Second, this paper focuses on the in-work incentive element of the policy; i.e., the sample considers single mothers who receive WFTC and who receive both the Working Tax Credit and Child Tax Credit later on as eligible, and thus the differences between the WFTC and WTC/CTC benefit rules are not expected to affect the sample.
2 Childcare usage and maternal time inputs are not included in the main regression, as they might be potential outcomes of the tax credit eligibility and give rise to a hybrid specification of the production function. Those inputs are included later to check the sensitivity of the results.
3 Given the slight change in the tax credit eligibility rule over time, we examined the transition matrix of treatment status across the whole sample period. Most mothers stayed in the same group across the 4 waves.
4 High-income mothers are not considered in the control group because they are likely to have considerably different inputs in children.