And apparently, intrinsically worthless gifts (e.g. an engagement ring?) are great signals.

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.

The plan is essentially an easy one. Cut the costs for people who want to get married via a tax rebate, and it makes sense. There is a lot of evidence to support the claim that marriage is good for society.

As the Telegraph reports

The statistical evidence is overwhelming: children brought up by two parents do much better, on average, than children brought up by just one. They are less likely to drop out of school or end up in prison, and more likely to pay taxes and remain in employment. This is not to deny that single parents do an excellent job and raise children who grow up to contribute much to society. It is simply to point out that across the population as a whole, two-parent families are more likely to achieve that result – and couples who marry are five times more likely to stay together, and provide that positive environment, than those who cohabit without any public commitment.

We all benefit from well-adjusted children, who are ‘polite, well educated and contribute to society’ this is what economics calls an ‘externality’ a benefit by a party that is not directly involved in the transaction. Parents are paying an extra  cost which we all benefit from.

Well the first is the claim by Ed Balls that the tax is “trying to socially engineer family life through a tax policy… [it] is hugely expensive and unfair.”. An economist would claim however that “Ahhhh! All taxes change peoples behaviour”  and The Working Families Tax Credit increased the benefits available to single mothers who sought employment thus penalising women who stayed home to look after their children or who remained with their husbands.(the latter claim being VERY  VERY contentious)

The second claim is that the credits “could stigmatise children” whose parents are not married. Again many feel that this is false by providing tax incentives for marriage it is difficult to see how it would  “stigmatise” the children of the unmarried, any more than providing incentives for single parenthood would “stigmatise” those whose parents live together.

There is of course one issue with the above arguments, they all involve children,  supporting and subsidising ALL married couples regardless of their parental status, in effect , penalises everyone else. So should the ‘tax break’ be administered to just  married couples with children? I don’t know?  Of course, nothing will replace a loving, stable, family; interested in their child’s upbringing and this is something that no taxbreak can fix.

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.

What’s more, the authors argue, this is more than chance correlation. By looking at the activities of parents at the age of 23 and their children’s test scores a decade later, they conclude that a higher level of social activity actively raises children’s attainment.

The relationship between education and social interaction is not surprising since education plays an important role in developing the social skills of children. Reading and writing (for example) are crucial for the ability to communicate and hence engage in social interaction later on in life.

The authors analyse the relationship between social interaction and educational attainment using British cohort data. In particular, the authors explore the relationship between a parent’s level of social interaction (as measured by club membership) and their child’s academic development.

The different types of clubs analysed include: political parties, environmental charities, other charities or voluntary groups, women’s groups, townswomen’s guilds or women’s institutes, parental or school organisations, tenants’ or residents’ associations, trade union or staff associations, and religious organisations.

Because family background is an important determinant of educational attainment, one might predict that the level of formal social activity undertaken by an individual may influence the academic development of their children. Social interaction outside the family may lead to parents being able to access the support and assistance of other individuals and, hence, may benefit parents in bringing up their children.

The study explores whether the children of parents who report relatively high levels of social interaction report relatively high levels of academic achievement.

Children’s scores in reading, mathematics and vocabulary tests are positively associated with the extent of their parents’ formal social interaction thereby highlighting a hitherto neglected influence of social interaction. The results suggest that a lack of social interaction may have adverse intergenerational effects in terms of educational attainment.

Children of parents who engage in relatively low levels of social interaction attain relatively low scores in reading, maths and vocabulary tests. These findings are not affected by how much social interaction exists within the family as well as the social interaction of the child outside the family.

Notes for editors: ˜Social Interaction and Children’s Academic Test Scores: Evidence from the National Child Development Study” by Sarah Brown and Karl Taylor was presented at the Royal Economic Society’s annual conference, 17-19 March 2008.

Sarah Brown and Karl Taylor are at the University of Sheffield

For further information: contact Sarah Brown on 0114 222 3404 (email: sarah.brown@shef.ac.uk); Karl Taylor on 0114 222 3420 (email: k.b.taylor@shef.ac.uk); or Romesh Vaitilingam on 07768 661095 (email: romesh@compuserve.com).

Read more research by Karl Taylor at EconPapers. Intute: Social Sciences features more Internet resources on the topics of the economics of education, economics of the family and economic sociology.