Income effect and household decisions about labour supply: a quasi-experimental approach

The goal of the project is to provide new empirical results regarding the role of the income effect in making decisions about the labor supply. The introduction of a child benefit in Poland (Family 500+ program) makes it possible to identify the income effect due to the unique design of the program: unconditional allowance for the second and each subsequent child in the family and the allowance for the first child in the family depending on the income level. The research results will be relevant not only in the context of planning effective family policy, but also in the context of discussions on introducing broad social transfers such as unconditional basic income.

We will examine:

• How does the introduction of unconditional benefit affect the labor supply of mothers and fathers? In addition to estimating the overall effect, we will also analyze the heterogeneity of the effect in terms of income, age or education. We will examine as well the effects of introducing the benefit on household consumption.
• How does the labour supply of parents react to the loss of the right to benefit due to the child reaching the age of 18? Do households adapt their labor supply to losing part of their income?
• How has the abolition of the income threshold for first child benefit influenced the labour supply of parents? In 2019, the income threshold for the first child benefit was abolished. Did the households that received the first child benefit adjust their labor supply?

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This project has received funding from the National Science Centre, Poland.
(PRELUDIUM 16; agreement no. UMO-2018/31/N/HS4/00887).