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.

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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.

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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.

Babies born to women who smoke will typically be 5.4% (6.5oz) lighter than other babies. But around half of this damage is because of unobservable traits of the mother. This means that stopping mothers smoking during pregnancy is important, but it is only half of the battle.

So while the effects of being a small baby stay with a child throughout its life, affecting its health, education and earnings potential, stopping a mother from smoking must be combined with helping her to be healthier in other areas of her life.

But for the harm that remains, the low educated mothers are hardest hit. Children born to mothers who left school at the age of 16 suffer double the harm for each cigarette smoked. The government must target its policy directly at these low educated families.

Women who do smoke in the early stages of pregnancy should not be ‘written off’ as ‘too late’. Surprisingly, the research shows that the harm to the baby is essentially reduced to zero if the mother quits by month five of the pregnancy.

This is much longer than conventional wisdom and previous research has suggested and tells us there’s more time than we thought to help the mothers change their behaviour during pregnancy.

The study is based on research into the lives of 6,500 children and their mothers, and went into exceptional detail of the mother’s lifestyle over her lifetime. The mothers were tracked from their child’s birth until the age of 42.

The research suggests that while previous studies have identified a link between smoking and low birth weight, none has looked in such depth at whether the experiences of the mother can alter this and how the harm accumulates during pregnancy.

The study calls on the government to alter radically its policy on helping pregnant women quit smoking, developing a more holistic approach to improving the health of these children during pregnancy and targeting the children of low educated mothers.

Notes for editors: Maternal Smoking During Pregnancy and Child Birth Weight by Emma Tominey was presented at the Royal Economic Society’s 2007 annual conference at the University of Warwick, 11-13 April.

Emma Tominey is at University College London.

For further information: contact Romesh Vaitilingam on 07768-661095 (email: romesh@compuserve.com).

Read more papers by Emma Tominey at EconPapers and search for more Internet resources on the issue of Women and Economics at Intute: Social Sciences.

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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.

This finding is consistent with an inadequate supply of high quality part-time jobs to suitably qualified women, and provides support for the introduction of incentives for the firms to increase the number of part-time jobs in skilled occupations.

The study also finds that women with children who enter the labour market have higher occupational attainment, and experience a smaller occupational penalty, than childless women. Thus, there is no evidence whatsoever of women with children (the majority of whom work part-time) being any less career-focused than women without children.

It is well known that part-time jobs in the UK are concentrated in poorly paid, low skilled occupations such as catering and retail. This study estimates that between 1974 and 2000, an average of 76% of women in full-time jobs were working in non-manual occupations while on average only 56% of women in part-time jobs were working in non-manual occupations.

The study draws on data from the National Child Development Survey in order to build up a picture of the employment choices and occupational attainment of British women between 1974 and 2000. It finds that:

• Holding a university degree reduces, but does not eliminate, the part-time occupational penalty.
• Women with children who enter the labour market have higher occupational attainment, and experience a smaller occupational penalty, than childless women.
• But irrespective of qualifications or family size, all women experience a significant part-time occupational penalty.

A university degree reduces the occupational penalty suffered by women in part-time work: among women aged 24 with no qualifications, those in full-time work are 27 percentage points more likely than part-timers to be working in a non-manual occupation.

In contrast, among women holding university degrees, those in full-time work are only 18 percentage points more likely to hold a job in a non-manual occupation. Therefore, although highly qualified part-timers suffer a substantial part-time occupational penalty, it is far less than that suffered by women with lower levels of qualifications.

The presence of children in a woman’s household also has implications for her occupational attainment. Women with children are more selective in terms of the quality of jobs that they are willing to accept than childless women: conditional on being in either full- or part-time employment, women with children are on average 10 percentage points more likely than childless women to be employed in non-manual occupations.

Thus, there is no evidence whatsoever of women with children being any less career-focused than women without children. Interestingly, this selectivity effect is greater for women in part-time jobs than those in full-time jobs. So the low occupational attainment of women in part-time work cannot be attributed to low occupational ambitions among women with children, the majority of whom work part-time.

Despite variation in the part-time occupational penalty across women with different levels of education and with different family sizes, all women experience a substantial part-time occupation penalty: after controlling for differences in individual characteristics, women in part-time work are on average 14 percentage points less likely than full-time workers to employed in non-manual occupations.

This finding is consistent both with the presence of a constraint on the supply of high quality part-time jobs and with women in part-time employment having a strong preference for jobs in low occupations. To the extent that there is a constraint on the supply of high quality part-time jobs to suitably qualified women, there are grounds for policy interventions aiming to equalise the occupational opportunities of women in full- and part-time employment.

Notes for editors: Part-time Work and Occupational Attainment Among a Cohort of British Women by Victoria Prowse was presented at the Royal Economic Society’s 2007 annual conference at the University of Warwick, 11-13 April.

Victoria Prowse is at the University of Oxford.

For further information: contact Romesh Vaitilingam on 07768-661095 (email: romesh@compuserve.com).

Find more papers by Victoria Prowse at EconPapers and search for more Internet resources on the issues of women and employment and the labour force and market at Intute: Economics.

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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.

These findings are generally consistent with the idea that people take account of their future wellbeing and specialise when they are married by working either in the labour market or at home. If a married woman who maintains a household believes that divorce is impending, she will wish to enter the labour market or increase hours of paid work, because this will allow her to acquire more work experience and boost her potential income in the future, when she may be forced to rely on her own resources.

Labour force participation among married American women increased steadily for four decades from 1950, largely due to major increases in the wage rate paid to women. During the 1990s, however, this growth stalled, despite unprecedented wage gains for married women over the decade.

At least part of this and other inconsistencies in the wage explanation is likely explained by changes in divorce rates, which peaked in the early 1980s in the United States, along with the UK and other western countries, after two decades of increases.

This study analyses data from the National Longitudinal Survey of Youth, which focuses on a representative sample of Americans who were teenagers in 1979 and has asked a wide range of questions every one or two years since. A fundamental problem is how to measure a persons chance of marrying or divorcing, as this obviously cannot be directly observed.

The paper takes three different approaches to estimating probabilities of changing marital status, all of which yield the same conclusions:

• First, marriage and divorce rates among people with similar demographic characteristics are used.
• Second, whether or not a survey respondent changes marital status in the year following any interview is used to form probabilities of marriage and divorce. A complication with this approach is that work decisions are likely to influence the likelihood of marriage or divorce in the future, necessitating the use of statistical techniques to deal with the possibility of causal relationships in two directions. Doubling a womans probability of divorce will result in her working 60 additional hours a year, all else being equal.
• Finally, an innovation of this study is to measure of the risk of divorce by using peoples evaluations of how happy they are with their marriages. This avoids many of the problems of the other approaches. The results are statistically significant and are striking: a woman who is unhappy with her marriage will work on average 283 hours more (or 6 hours per working week) in the following year than a woman who is very happy with her marriage.

The evidence indicates that there are two distinct dimensions to the relationship between work hours and the risk of divorce. Woman in demographic groups that suffer from high divorce rates tend to work long hours over their entire lives. Meanwhile, individual married women also respond to unexpected increases in the likelihood of divorce from year-to-year by increasing the hours they spend in paid work.

These findings point to an unexpected negative consequence of a falling divorce rate and imply that this may hamper government efforts to increase labour force participation among married women. If current trends persist, ever-larger wage gains may be needed to induce more married women to enter the workforce.

Notes for editors: The Effects of Divorce Risk on the Labour Supply of Married Couples by Kerry Papps was presented at the Royal Economic Societys 2007 annual conference at the University of Warwick, 11-13 April.

Kerry Papps is at Cornell University.

For further information: Romesh Vaitilingam on 07768-661095 (email: romesh@compuserve.com).

Find more papers by Kerry Papps at EconPapers and search for more Internet resources on the issues of women and economics and labour economics.

· 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.

· Schools that are so popular that they are well over-capacity attract higher house prices, even if the league table performance is not outstanding. And, the premium for league-table performance is larger for popular schools. This could indicate a degree of herd behaviour in school choice. An over-capacity school is a popular school, and so in the eyes of eager parents a good school.

· These findings show that high-performing primary schools are valuable local commodities, and add weight to the argument that residence-based school admissions procedures lead to selection by mortgage and income segregation at primary school.

· At 2004 prices, parents can expect a move from an average dwelling outside a weak school, to one outside a top over-subscribed school, to cost around £61,000 (26% of the mean property price in London and the South East in April-June 2004).

· The same improvement in less popular, under-capacity schools will cost around £12,000 less.

Anyone with school age children worries about getting the best school for their child. For primary schools in England, this generally means choosing a home near a school, because admission to popular schools is soon restricted to families living nearby.

This research looks closely at how parents choices over primary schooling are revealed in house price patterns, using extremely detailed information on the location and timing of house sales in London and the South East over five years.

The study considers some special features of the English school admissions system that add to the complexity of parents decision process. For a start, catchment areas are vaguely defined, and it is usually a question of nearest-in-first-in among families competing for the same school. This generates uncertainty about which residential locations are best.

The problem is compounded by the fact that schools have limited number of pupil places, usually capped by a limit to class sizes and the number of classroom spaces, but parents do not know for certain whether a school will be over or under-subscribed. Parents also have vague and confusing information about school quality, and may look simply at a school’s popularity as an indicator of its effectiveness.

Paying for Primary Schools: Admission Constraints, School Popularity or Congestion by Steve Gibbons and Steve Machin is published in the March 2006 issue of the Economic Journal.

For further information: contact Romesh Vaitilingam on 07768-661095 (email: romesh@compuserve.com)

Read more about research from Steve Machin via IDEAS and for related papers via the EconPapers service. Intute: Social Sciences also link to more items on the topic of house prices

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.

The welfare system is widely thought to affect important dimensions of individuals’ behaviour, including how much to work, how much education to acquire and how much to save. Indeed, it may even affect individuals’ decision about whether and when to form a partnership and have children.

While there has been a vast amount of research on the effect of welfare benefits on labour supply, until now, there has been little concrete evidence available on the effect of the benefit system on family structure in the UK.

Anderbergs research defines, calculates and estimates the effects of the financial incentives for partnership formation created by the IS and family tax credit systems.

Two individuals are said to face a partnership bonus if they are eligible for more benefits as a couple than as two singles. If they are eligible for fewer benefits as a couple, they are said to face a partnership penalty.

Using a large sample of individuals drawn from the Family Resources Survey, 1995-2002, Anderberg shows that there is a wide distribution of partnership bonuses and penalties affecting the population.

The majority of individuals face some form of partnership bonus or penalty, and while in most cases, the values are small, bonuses and penalties in the range of £100/week are not uncommon. For example, 10% of all couples face a WFTC partnership bonus of at least £80/week while roughly another 10% of all couples face a WFTC partnership penalty of at least £80/week.

Using a large sample of women drawn from the Family Resources Survey, 1995-2002, Anderberg then considers how partnership bonuses and penalties affect individuals’ partnership status. He shows that a £100/week partnership penalty reduces the probability of having a partner by about seven percentage points.

Finally, he considers the effect of the 1999 WFTC reform, a key policy implemented by the Labour government. He shows that the WFTC reform encouraged partnership formation primarily by making partnership bonuses more common in the population.

Applying the estimates of the analysis suggests that the WFTC reform may have increased the partnership rate among women by 0.5 percentage points. Stated differently, the reform may have created more than 50,000 new couples.

Notes for editors: Tax Credits, Income Support and Partnership Decisions by Dan Anderberg was presented at the Royal Economic Society’s 2006 Annual Conference at the University of Nottingham, 18-20 April. Anderberg is at Royal Holloway, University of London.

For further information: contact Romesh Vaitilingam on 0117-983-9770 or 07768-661095 (email: romesh@compuserve.com).

Discover more papers from Dan Anderberg at EconPapers and IDEAS. Search for more Internet resources on the issue of tax credits at Intute: Social Sciences.

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.

The original CS formula was doomed to fail in many cases. Determining liabilities was so complicated that few Dads could understand why they owed so much, and many felt that they had settled long before with a clean break. The CSA assessments were late coming because the rules were complicated and because Dads didn’t want to pay and were reluctant to provide the information required. And the CSA had no resources left to pursue deadbeat Dads because the system was so expensive to administer.

For their part, Mums often did not care much because, if they were on Income Support (IS, now called Jobseeker’s Allowance), they did not benefit much from anything that Dads paid because the welfare system just reduced their welfare payments pound for pound. Indeed, given a choice, Mums would rather have some money from the Department for Work and Pensions (DWP), which almost always pays on time, than from Dad, who usually paid too little, too late.

If the system could be made to work better, we would expect high potential CS receipts to make Mums better able to exit from a bad partnership. And having more money in that event is good for the children. On the other hand, we would expect high potential CS liabilities to make Dads think twice before leaving or behave better so they don’t get thrown out. And better Dads are also good for the children.

Despite the large failure rate in the collection of CSA assessments, the mere threat of a large assessment has already had a significant impact on the thinking of many fathers when deciding whether or not to leave the family unit. The researchers examine a large sample of households who have been followed since 1991 and find strong evidence that the large child support liabilities, arising from the 1992 rules, significantly reduced the risk of separation. Indeed, the results are big enough to explain all of the approximately 15% fall in divorce rate for parents with dependent children that has occurred since 1992. The researchers believe this effect would have been much larger if the CSA had been more effective at achieving payment compliance from fathers.

The researchers feel that the new CSA rules still fail to resolve the key problems and indeed may make them worse. The formula is much simpler only one piece of information is required: Dad’s income. So it’s simpler for Dads to understand why they owe so much. And now there is a disregard in the IS system (albeit a very small one) that allows Mums to keep the first £10 per week of CS paid. It is also meaner, on average, to Mums (and more generous to Dads). The hope was that all this would transform compliance. It hasn’t: simpler has meant cruder at matching liabilities with the ability to pay and compliance has even got worse. And the separation rate of parents has started to increase in response to the lower liabilities.

We need a system that pays up in the event of separation. So it provides real resources to make for better children. And is sufficiently generous that it provides real incentives for parents to get on better, and for parenting to be taken seriously. It is possible to do this. The CSA should pay if the father does not. Making the CSA pay would ensure that the CSA has sharp incentives to get full compliance.

But if the CSA does provide what is effectively full insurance cover against the risk of children having deadbeat Dads, then this increases the incentives for Dads to be deadbeat. So it needs to be backed by the power to effect compliance mandatory withholding via the tax system will work for most Dads, and the ultimate threat of prison works for most taxpayers. Denmark has no problem doing this, CS liabilities are as large, on average, as in the UK and non-compliance is almost unheard of.

But it will now be difficult: we have had more than a decade of dithering where we have firmly established a culture of not paying child support. Changing entrenched habits will require firmer action than if those habits had not taken hold. And it will be expensive: tough compliance and effective collection measures are likely to be expensive. While its tempting to ask parents to pay say in the form of lower child benefit, it seems simplest to ask the taxpayer since we all benefit if children from broken homes do better in life and, in any case, most taxpayers have (or have had, or intend to have) children.

Notes for editors: Child Support Liability and Partnership Dissolution by Ian Walker and Yu Zhu is published in the March 2006 issue of the Economic Journal. Walker is at the University of Warwick; Zhu is at the University of Kent.

For further information: contact Romesh Vaitilingam 07768-661095 email: romesh@compuserve.com

Related information: See related articles from Yu Zhu at IDEAS or from both authors via Econpapers or find more online resources about this issue by searching for child support at Intute: Social Sciences or browsing sites related to Social Security Benefits.