FEMALE LABOUR SUPPLY , HUMAN CAPITAL AND WELFARE REFORM Richard

We consider the impact of Tax credits and income support programs on female education choice, employment, hours and human capital accumulation over the life-cycle. We thus analyze both the short run incentive effects and the longer run implications of such programs. By allowing for risk aversion and savings we are also able to quantify the insurance value of alternative programs. We find important incentive effects on education choice, and labor supply, with single mothers having the most elastic labor supply. Returns to labour market experience are found to be substantial but only for full-time employment, and especially for women with more than basic formal education. For those with lower education the welfare programs are shown to have substantial insurance value. Based on the model marginal increases to tax credits are preferred to equally costly increases in income support and to tax cuts, except by those in the highest education group. Richard Blundell University College London Department of Economics Gower Street London, ENGLAND [email protected] Monica Costa Dias Institute For Fiscal Studies 7, Ridgmount Street London WC1E 7AE, UK [email protected] Costas Meghir Department of Economics Yale University 37 Hillhouse Avenue New Haven, CT 06511 and IZA and also NBER [email protected] Jonathan M. Shaw Institute For Fiscal Studies 7, Ridgmount Street London WC1E 7AE, UK [email protected]