CFDP 1892R

Female Labour Supply, Human Capital and Welfare Reform

Author(s): 

Publication Date: April 2013

Revision Date: April 2015

Pages: 80

Abstract: 

We estimate a dynamic model of employment, human capital accumulation — including education, and savings for women in the UK, exploiting policy changes. We analyze both the incentive effects and the welfare implications of tax credits and income support programs and we account for their insurance value. We find important incentive effects on education choice and labor supply, with single mothers having the most elastic labor supply. Returns to experience increase with education, but experience only accumulates when in full-time employment. Finally, marginal increases in tax credits are preferred to equally costly income support or to tax cuts.

Keywords: 

Female labor supply, Welfare reform, Tax credits, Education choice, Dynamic discrete choice models, Life cycle models

JEL Classification Codes:  H2, H3, J22, J24