Government Support for Young Families in Israel

49 Pages Posted: 18 May 2015

See all articles by Adi Brender

Adi Brender

Bank of Israel - Research Department

Michel Strawczynski

Hebrew University of Jerusalem - Dept. of Economics and School of Public Policy; Hebrew University of Jerusalem _ Public Policy

Date Written: May 2015

Abstract

This paper examines the policy option of providing government assistance to families with young children and financing it by increasing income taxes when the children leave home and the parents' wages rise due to their tenure in the labor market. We examine the expenditure composition and the characteristics of labor market participation of parents of young children (up to age 9) in Israel, and find that these families have higher expenditures than other families, and that their income in the years in which children are present in the household is lower than in the following years. We do not find evidence that the relative position of young families deteriorated during the last decade, except for the housing market where we identify a consistently rising share of these families residing in rented dwellings; such a trend did not develop among families without children or families with older children (aged 10-18). We also show that parents of young children are characterized by high employment rates and persistent employment. A comparison of government support for young families in other OECD countries with those in Israel for 14 representative family types — characterized by their structure and income composition — shows that it is higher in the other OECD countries for all of the family types. A simulation of raising the average benefits for young families in Israel to the level common in other OECD countries, while raising income tax rates at older ages in a way that keeps the policy fiscally balanced — and the individuals' lifetime income level unchanged — indicates that welfare can be increased substantially via consumption smoothing over the family's life cycle.

Suggested Citation

Brender, Adi and Strawczynski, Michel, Government Support for Young Families in Israel (May 2015). Israel Economic Review, Vol. 12, No. 2, Available at SSRN: https://ssrn.com/abstract=2607182

Adi Brender (Contact Author)

Bank of Israel - Research Department ( email )

PO Box 780
Jerusalem 91007
Israel
+972 2 655 2618 (Phone)
+972 2 655 2657 (Fax)

Michel Strawczynski

Hebrew University of Jerusalem - Dept. of Economics and School of Public Policy

Mount Scopus
Jerusalem
Israel

Hebrew University of Jerusalem _ Public Policy ( email )

School of Public Policy
Jerusalem
Israel
972-2-5881531 (Phone)

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