The Re-distributive Role of Child Benefits Revisited

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Abstract

In this paper, we reexamine the commonly invoked argument that due to the existence of a negative correlation between earning ability and family size, the latter can be used as a “tagging” device, justifying subsidizing children (via provision of child allowances) to enhance egalitarian objectives. Employing a benchmark setting where the quality–quantity paradigm holds, we show that the case for subsidizing children is far from being a forgone conclusion. We demonstrate that the desirability of subsidizing children crucially hinges on whether benefits are means-tested or are offered on a universal basis.

Original languageEnglish
Pages (from-to)476-501
Number of pages26
JournalInternational Tax and Public Finance
Volume22
Issue number3
DOIs
StatePublished - 1 Jun 2015

Keywords

  • Child allowance
  • Means-testing
  • Optimal taxation
  • Re-distribution
  • Tagging
  • Universal

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