Do Parents Tax Their Children? Teenage Labour Supply and Financial Support

68 Pages Posted: 18 Jul 2016

Abstract

This paper models child employment and parental pocket money decisions as a non-cooperative game. Assuming that the child human capital is a household public good and that the relationship between child human capital and employment is concave, we compare the welfare obtained under different decision-making mechanisms and test the predictions of the model for a cohort of English teenagers in compulsory education. Our results support a situation in which parents 'tax' their children's earnings, withdrawing financial support as the child increases his working hours. This strategy forces the child to internalise the social cost of his activities.

Keywords: intra-household transfers, pocket money, child labour supply, noncooperative game, human capital

JEL Classification: C52, C72, D13, J22

Suggested Citation

Holford, Angus, Do Parents Tax Their Children? Teenage Labour Supply and Financial Support. IZA Discussion Paper No. 10040, Available at SSRN: https://ssrn.com/abstract=2810451 or http://dx.doi.org/10.2139/ssrn.2810451

Angus Holford (Contact Author)

University of Essex ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
27
Abstract Views
425
PlumX Metrics