Economics in Action

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.

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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.

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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.

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