Measuring the Effect of Child Benefit on Household Expenditures: Evidence from Canadian Households’ Survey Data

Jason Adams,Sid Ali Amedah,Maxime Fougère

doi:10.4236/jss.2020.86005

Abstract

This study examines the effects of the Canada Child Benefit on household expenditures. Estimation of child benefit impact on household expenditure is challenging since benefit and household income may be endogenously determined. Relying on permanent income hypothesis and based on Engel’s approach, findings suggest that spending patterns vary by household composition and income, but overall results indicate that receipt of this benefit is associated with a significant increase in households’ wellbeing. More specifically, expenditure elasticities estimates indicate that spending on child care for households receiving higher proportions of the benefit is the most sensitive spending to any change in household permanent income, which may indicate the existence of financial constraints for those households that prevent them from maximizing their utility. Similarly, spending on school-related items for those receiving lower proportions also represents a sensitive spending.

Highlights

Evidence that early child development experiences set the foundation for lifelong learning, skills acquisitions, behaviour, health, and wellbeing, has pushed many countries to implement child benefit systems in different forms such as tax credit, tax deduction or direct transfer, under different eligibility conditions, either universal or targeted towards some vulnerable children
Expenditure elasticities estimates indicate that spending on child care for households receiving higher proportions of the benefit is the most sensitive spending to any change in household permanent income, which may indicate the existence of financial constraints for those households that prevent them from maximizing their utility
Expenditure elasticities estimates indicate that spending on child care for households receiving higher proportions of the benefit is the most sensitive spending to any change in household permanent income, which indicate the existence of financial constraints for households that prevent them from maximizing their utility

Summary

Introduction

Evidence that early child development experiences set the foundation for lifelong learning, skills acquisitions, behaviour, health, and wellbeing, has pushed many countries to implement child benefit systems in different forms such as tax credit, tax deduction or direct transfer, under different eligibility conditions, either universal or targeted towards some vulnerable children. They all aim to guarantee a certain minimum level of wellbeing for children and their families. The CCB is a tax-free monthly benefit that replaces existing systems, such as the Canada Child Tax Benefit, Universal Child Care Benefit, and National Child Benefit Supplement (NCBS) programs

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Conclusion