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Did Working Families' Tax Credit work? Analysing the impact of in-work support on labour supply and programme participation

Brewer, M.; Duncan, A.; Shephard, A.; Suarez, M.J.; (2003) Did Working Families' Tax Credit work? Analysing the impact of in-work support on labour supply and programme participation. Analysis and Research, Inland Revenue: London, UK. Green open access

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Abstract

With micro-data from before and after a major reform in 1999 to the structure and form of in-work transfers in the UK, this paper uses a structural model of labour supply and programme participation to show the impact of a reform to in-work support (Working Families' Tax Credit) on both labour supply and programme participation (or take-up). Estimates suggest that the changes in in-work incomes through the introduction of WFTC increased labour supply of lone mothers by around 4.6 percentage points, slightly reduced labour supply of mothers in couples by 0.2 percentage points, and increased the labour supply of fathers in couples by 0.8 percentage points, equivalent to a net increase in participation of 94,000 workers. Participating in Family Credit, the UK's in-work programme before October 1999, conferred a utility loss as well as a utility gain from the extra income, but we find this utility cost of participation to be lower under WFTC.

Type: Report
Title: Did Working Families' Tax Credit work? Analysing the impact of in-work support on labour supply and programme participation
ISBN-13: 9781904983088
Open access status: An open access version is available from UCL Discovery
Publisher version: http://www.hmrc.gov.uk/research/index.htm
Language: English
Additional information: © Crown copyright 2003. Reproduced under the Click-Use Licence. Link provided by HM Revenue and Customs, which followed on from the Inland Revenue. A final updated version of this paper can be found at http://eprints.ucl.ac.uk/18444/
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/18475
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