Industrial countries typically provide income transfers to families with young children. Traditionally, these family benefit programs were motivated by distributional concerns: families with children faced higher expenditure needs than other families, and a concern for horizontal equity led to transfers. Throughout the 1990s, however, many countries introduced benefits aimed at improving labor market incentives for mothers with young children. In the United States, the Earned Income Tax Credit (EITC) has played this role, but similar programs exist in Europe, Canada, and elsewhere.
Much effort has been expended on evaluating the labor market impact of child benefits. However, less work has examined the impact of these programs on broader outcomes such as the mental and physical health of both the children and the parents, outcomes that follow from the traditional equity motivation for child benefits. In this paper, we review and extend some recent results studying the expansion of family benefits in Canada. In particular, we exploit a change that occurred in the province of Manitoba to highlight the effects of child benefits on both labor supply and family outcomes.Versions: