Economics in Action

In many ways economics is the study of incentives. An incentive is any factor (financial or non-financial) that enables or motivates a particular course of action, or counts as a reason for preferring one choice to the alternatives.

In English, Incentives make you want to do something you otherwise wouldn’t want to do. Today let’s talk about an incentive which is in the media at the moment, the oft criticised, proposed marriage tax break. (more…)

In the latest of out podcasts supporting the Royal Economic Society Conference 2008, Romesh Vaitilingam talks to Karl Taylor about how socially active parents choose to be and the effect that can have on their kids.

Listen to the interview

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Parents who are active in various kinds of clubs “from sports to charities, from political parties to religious groups“ may raise the test scores of their children. That is the central finding of new research by Professor Sarah Brown and Dr Karl Taylor presented at the Royal Economic Society’s 2008 annual conference.

The report uses data from the National Child Development Study, which has tracked the lives of a representative sample of the British public born in a single week in 1958. It finds that the test scores of children in reading, mathematics and vocabulary tests are positively related to their parents’ level of social participation.

(more…)

In the latest of a series of interviews from the Royal Economic Society Conference 2007, Romesh Vaitilingam talks to Emma Tominey about the effect of smoking during pregnancy.

Listen to the interview

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Mothers who smoke during pregnancy will have smaller babies. But much of the harm is due to unobservable traits of the mother. If mums stub it out by the time they are five months pregnant, the damage is as good as undone.

At the same time, the lasting harm to babies is greatest if the mothers have low education. So a much more holistic approach to improving child health in pregnancy is needed to help thousands of children break out of the poverty trap.

These are the conclusions of extensive new research by Emma Tominey, presented to the Royal Economic Society’s 2007 annual conference at the University of Warwick, 11-13 April. (more…)

In the latest of a series of interviews from the Royal Economic Society Conference 2007, Romesh Vaitilingam talks to Victoria Prowse about the ‘Part-time Occupational Penalty’ for UK women.

Listen to the interview

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

No matter what qualifications they have or how big their family is, British women face a substantial occupational penalty if they work part-time. That is the central finding of new research by Victoria Prowse, presented to the Royal Economic Society’s 2007 annual conference at the University of Warwick. (more…)

In the latest of a series of interviews from the Royal Economic Society Conference 2007, Romesh Vaitilingam talks to Kerry Papps the effect of divorce on women and work.

Listen to the interview

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Married women work more hours in the labour market when they face a high likelihood of divorce: for example, a woman who is unhappy with her marriage will work on average 283 hours more in the following year than a woman who is very happy with her marriage. In contrast, married men are unaffected by the probability of divorce.

These are among the findings of new research by Kerry Papps. The study also finds that both single men and single women work more when they have a high chance of marrying in the near future.

(more…)

Research by Steve Gibbons and Steve Machin confirms that there is a house price premium related to the performance of the nearest primary schools. But some of the findings of the study, published in the Economic Journal, run counter to common perceptions:

· A ten-percentage point improvement in the league-table performance (at age 11, Key Stage 2) can be expected to add at least 3% to the price of a house located immediately next to a school. As might be expected, houses further away are less affected.

· Despite this, primary schools are, in general not desirable local amenities. Only the 1-in-10 top performing schools tend to lift significantly the prices of houses close by.

(more…)

The governments introduction of the Working Families Tax Credit (WFTC) may have created more than 50,000 new couples, according to new research by Dan Anderberg.

His study, presented at the Royal Economic Societys 2006 Annual Conference at the University of Nottingham, finds that benefits like family tax credits and Income Support (IS) frequently subsidise or penalise the formation of partnerships according to whether two individuals are better or worse off as a couple than apart.

Anderberg finds that there is a sizeable response to these financial incentives: for example, a £100/week partnership penalty reduces the probability of having a partner by about seven percentage points.

(more…)

Researchers at the Universities of Warwick and Kent are calling on the Child Support Agency (CSA) to replace deadbeat Dads. Where fathers fail to pay a CSA assessment, the CSA itself should simply pay mothers the amount due.

Such an arrangement would create a sharp financial incentive for the CSA itself to be more active in pinning down recalcitrant fathers. The agency would have to have new powers (and be prepared to use existing powers) to effect compliance and seek new effective powers such as mandatory withholding via the tax system.

Drawing on evidence published this month in their research report in the Economic Journal, Professor Ian Walker and Dr Yu Zhu say:

Child support (CS) is a really good idea that needs to be made to work. Policy so far has been about trying to make Dads better at paying if they leave. But policy should also be about making Dads into better Dads if they stay.

(more…)