June 1, 2007
In October 1999, the British government enacted the Working Families’ Tax Credit which aimed at encouraging work among low-income families with children. This paper uses longitudinal data collected between 1991 and 2001 to evaluate the effect of this reform on single mothers. We identify this impact by comparing changes in behavior of lone mothers to changes for single women without children. The reform led to a substantial increase in employment rates of about 5 percentage points, which was driven by both higher rates at which lone mothers remained in the labor force and higher rates at which they entered it. Women’s responses were highly heterogeneous, with effects double this size for mothers with one pre-school aged child, and virtually no effect for mothers with multiple older children. Of equal importance are our findings that the reform led to significant increases in paid childcare utilization and reductio ns in> single mothers’ subsequent fertility and in the rate at which they married. Our findings suggest that the generous childcare tax credit component of the reform played a key role in explaining the estimated employment and childcare usage responses.
Journal of Human Resources
Volume and page numbers
Volume: 42 , p.1 -32
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