Effects of a Universal Child Allowance Program on Labor Supply, Earned Income, and Family Expenditure: Evidence from Taiwan
*Names in bold indicate Presenter
Extant literature examining effects of universal child allowance (UCA) programs are largely based in European countries, Canada, and Argentina. There is a dearth of literature on effects of UCA in an Asian context. As family culture, societal norms, and welfare institutions are different in East Asia relative to western contexts, extending knowledge on effects of UCA programs to broader geographical areas allows theorization of general behavioral responses to cash transfer programs. Studying effects of UCA in East Asia could also inform governments in this region to gauge the costs and benefits of UCA policies, as many countries in East Asia face the low fertility problem and are debating ideal social investment policies to support their citizens. The UCA program piloted in Taoyuan, Taiwan, since 2015 offers a unique opportunity for such investigation. Taoyuan is the first and only jurisdiction in Taiwan that implements a non-mean-tested UCA program, which aims to safeguard children’s rights to growth and to alleviate families’ economic burden of childrearing. All families with children aged between 0 and 3 who have resided in the city for at least one year are eligible to apply for UCA. The Taoyuan government provides a UCA of 3,000 New Taiwanese Dollars per month, which is approximately 11% of average monthly income in Taoyuan.
We use a representative cross-sectional dataset in Taiwan – the 2011-2017 Survey of Family Income and Expenditure (SFIE). The SFIE contains rich information on family income, expenditure, and household characteristics in Taiwan. We examine the effects of UCA provided by Taoyuan on three sets of outcomes: (1) transfer income from government programs; (2) female employment status and average female earned income; (3) household expenditure in various categories. We adopt a difference in difference in difference (DDD; triple differences) design to identify effects of universal child allowance in Taoyuan. The first difference is to take the difference in outcomes between Taoyuan and other counties. The second difference is to compare changes in outcomes between pre-policy change (2011-2014) and post-policy change (2016-2017). The third difference is to take the differences between the treatment group, families affected by the policy (families with children aged 3 and below), and the comparison group, families unaffected by the policies but are similar to the treatment group (families with children aged between 4 and 6 and without children below three years of age), which helps accounting for unobserved time-invariant characteristics between Taoyuan and other counties. We control for households and county characteristics and county and year fixed effects. We use OLS models to estimate the policy effects.
Preliminary results indicate that UCA increased transfer income from government programs. UCA did not affect the female labor supply at the extensive margin. With regard to family expenditure, results show that UCA increased expenditure on health care.