Publication Date: April 2013
Revision Date: March 2016
We estimate a dynamic model of employment, human capital accumulation - including education, and savings for women in the UK, exploiting tax and beneﬁt reforms, and use it to analyze the eﬀects of welfare policy. We ﬁnd substantial elasticities for labor supply and particularly for lone mothers. Returns to experience, which are important in determining the longer-term eﬀects of policy, increase with education, but experience mainly accumulates when in full-time employment. Tax credits are welfare improving in the UK and increase lone-mother labor supply, but the employment eﬀects do not extend beyond the period of eligibility. Marginal increases in tax credits improve welfare more than equally costly increases in income support or tax cuts.
Female labor supply, Welfare reform, Tax credits, Education choice, Dynamic discrete choice models, Life cycle models
JEL Classification Codes: H2, H3, J22, J24
See CFP: 1531