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This paper examines the socio-economic consequences of teenage motherhood for a cohort of British women born in 1970. We employ a number of methods to control for observed and unobserved differences between women who gave birth as a teenager and those who do not. We present results from conventional linear regression models, a propensity score matching estimator, and an instrumental variable estimator that uses miscarriage data to control for unobserved characteristics influencing selection into teenage motherhood. We consider the effects on equivalised family income at age 30, and its constituent parts. We find significant negative effects of teenage motherhood using methods that control only for observed characteristics using linear regression or matching methods. However once unobserved heterogeneity is also taken into account, the evidence for large negative effects becomes much less clear-cut. We look at older and younger teenage mothers separately and find that the negative effects are not necessarily stronger for teenagers falling pregnant before age 18 compared with those falling pregnant between 18 and 20, which could further suggest that some of the negative effects of teenage motherhood are temporary.

This paper studies the determinants of partnership dissolution and focuses on the role of child support. We exploit the variation in child support liabilities driven by an important UK policy reform to separately identify the effects of children from the effect of child support liability. We find strong evidence that an increase in the child support liability significantly reduces dissolution risk. Our results suggest that child support criteria that are based on the non-custodial parent's income, compared to criteria based on aggregate incomes of both parents, would imply much smaller separation rates.

This research is concerned with the demand for lottery tickets and uses data for the UK National Lottery that records the behaviour, incomes and characteristics of almost 10,000 individuals. Some of the data relates to people surveyed during a "double rollover" - the jackpot had been enhanced by adding the jackpots from the previous two weeks which had not been won. This allows us to estimate how the demand for lottery tickets varies with the rate of return since this return is higher in rollover draws. It is noticeable that richer people appear to be more likely to play in rollover weeks and we need to control for income in order to obtain unbiased estimates of the price elasticity. We find that the demand for the UL National Lottery is quite sensitive to changes in the financial rate of return arising from rollovers: a typical rollover increases the rate of return by about 10% and generates an additional 16% in sales. The income effect is negative - a lottery ticket is an example of an "inferior" good where the rich buy less than the poor: an 10% increase in income generates a fall in demand of 1.2%. But, to offset this negative income effect we find that some characteristics associated with high income (e.g. being middle aged) are positively correlated with lottery demand. We use the estimates to compute the welfare gain from the introduction of the lottery. The idea behind this is that participation in the lottery is voluntary, so only those who feel that it is beneficial to buy tickets will buy them. The implication of this is that, although consumers are, on average, ex post financially worse off after buying lottery tickets (since they are an extremely poor investment with a return that is usually approximately -55% per week) they feel better off ex ante when they buy them because of the pleasure associated with doing so. We do not know what these pleasures are but can presume that they exist from the fact that people buy this commodity with such a poor financial return. Our estimates imply that the pleasure is worth an average of 71p per draw per adult: which works out as 1.8 billion per annum - this is about what a 1p reduction in the income tax rate would be worth on average. Moreover, the gain is largest for those that spend the most - although the gain from successive tickets falls. Thus, the biggest spenders, which are the middle income group, gain most. However, this arises because the data confounds the lifecycle effect and the income effect: our estimates imply that those with the highest income over their lifetime will buy fewest tickets over their lifetime. Thus, the largest lifetime gains will be to those with lowest permanent incomes

This research (supported by the Leverhulme Trust) investigates the relationship between working behaviour (whether one is unemployed, not participating, working part-time or full-time), cash transfer programmes (such as in-work transfers like Family Credit, and out-of-work transfers like Income Support), and in-kind transfer programmes. The latter are usually where goods or services are supplied directly (and examples would be free school meals, welfare milk, etc.) but anything that is subsidised so that its price at the margin is zero can also be thought of as an in-kind transfer - so housing benefit could be thought of in this way. The motivation for the work is that in-kind and cash in-work transfers have both been suggested as a way of relieving poverty without having adverse consequences for work incentives. Thus we analyse the effects of these different forms of transfers on working behaviour. One problem with transfer programmes is that they may suffer from take-up (or participation) rates that are less than 100% - that is, some households that are entitled to a transfer may not receive it. This may be due to some kind of cost (stigma, for example) or to ignorance (which can be thought of as a cost associated with acquiring information). Adopting a methodology that allows for less than 100% participation in transfer programmes is one advance of this paper. A second important factor is that, if we are to consider the effect of transfer programmes on labour market choices, we need to allow for the choices that are available: some individuals may want to work but not be able to find work and we allow for this involuntary labour market non-participation in our work. The analysis is based on a sample of 4527 lone mother heads of households constructed from pooling Family Expenditure Surveys from 1978 to 1992. We concentrate on lone mothers since we want to abstract from the interdependencies between the decisions of adults in households: of course, they are also an important group in their own right. Family Credit is a in-work cash transfer programme that aim to encourage lone mothers to work but has been bedevilled by low participation: we find that the (stigma) costs associated with Family Credit are quite high - perhaps as high as half the typical entitlement. In contrast, in-kind transfers seem to have low levels of stigma - perhaps only 20% of typical entitlements (although this might be because the stigma is often borne by the children). Thus, in-kind transfers may have an important role in promoting work incentives.

Economists have frequently argued that cash transfers are to be preferred to in-kind transfers. However, the argument is strictly true only where there are no market failures, and there are several arguments in favour of in-kind transfers that are valid in these circumstances In-kind transfers are often used where policy may be specifically concerned with the welfare of the recipient but a cash transfer cannot be made directly to the intended recipient. This might be the case with basic health care and education services for children where cash transfers would have to be made via the parents who might choose to spend such cash in a different fashion. This is called the agency problem. A second argument relates to the desire to exploit the stigma associated with visibly being in receipt of some transfer, in order to improve the targeting of such transfers to the most needy. This may be most relevant where recorded income may not be a good indicator of well-being such as may be the case in an economy with a large underground. The essence of this argument is that only the genuinely poor find it worthwhile to participate in the programme if it is stigmatised. In order to encourage only the poorest to select themselves into the programme the quality of the in-kind provision may have to be low: if the quality is a normal characteristic of a good then few of the richest will participate if the quality is low since they prefer a higher quality at the market price. Both of these arguments suggest that an in-kind transfer is not valued as highly as cash by the recipients: in the first case because the agent cannot trade the transfer for cash from which rent could be extracted; and in the second case because the value of the transfer is net of the costs of the stigma. The fact that in-kind transfers are worth less than cash but worth more to the poor than to the rich, offers the attractive prospect of being able to both relieve poverty and improve work incentives. In fact, in-kind transfers seem to be most prevalent in welfare schemes for those out-of-work while cash transfers are most commonly used for those in-work. At the same time as improving work incentives and improving the targeting of expenditure to alleviate poverty, in-kind transfers may be able to protect the welfare of children in poor households from adverse shocks associated with variations in parental income. Indeed, this is precisely why many such schemes were introduced. However, if family members are altruistic towards each other then there is the prospect that an in-kind transfer directly to one household member may be offset by some countervailing action by other household members. This so-called "rotten-kid" phenomenon severely undermines the case for in-kind transfers to children - if such transfers can be neutralised by some corresponding intra-household reallocation then not only is the affect on child welfare undermined but so too is the potential beneficial work incentive effect since the benefit of the transfer to the child could be appropriated by the parent. This paper is concerned with the effect of three UK nutrition programmes (free school lunches, school milk and welfare milk) on the household expenditure on milk and (non-milk) food. The aim of the paper is to estimate the extent to which households offset these in-kind transfers by reducing corresponding expenditures. Thus, the paper addresses the issue of the extent to which dependent children and parents are altruistically linked as well as the more conventional issue of the extent to which in-kind transfers are equivalent to cash. Our analysis is based on detailed modelling of the determinants of household expenditures and shows that households do offset these in-kind transfers - the effect is small for free school lunches suggesting that the agency problem may be small, but is large for the two milk schemes suggesting altruism is quite strong. The policy lesson is that in-kind transfers may not be desirable because agency is not a big problem and will typically not be effective unless what is being transferred would not typically be bought (a low quality school lunch for example).

This paper estimates the impact of schooling on the earnings of men. It is important to know what the return to educational investments might be since a high return to such investments may imply that individuals, for whatever reason, are investing in too little schooling. The major preoccupation in this literature has been the attempt to unravel the simultaneous relationship between schooling and wages. That is, wages depend on schooling since schooling enhances human capital, but schooling decisions depend on wages for one or more of a number of reasons - for example, individuals will invest more in schooling the greater is the return to that schooling. Traditional estimates of the return to an additional year of schooling in the UK has suggested that this return is of the order of 7%. However, several recent US studies and our earlier work (Harmon and Walker, American Economic Review, December 1995), based on UK data, suggest a much larger figure - in excess of 15%. This earlier work made the critical assumption that wages are linearly related to years of schooling and exploited the changes in the minimum school leaving age that have occurred in the UK to infer the returns to an exogenous increase in the amount of schooling. This paper examines the robustness of this important result to the linearity assumption and to the way in which we infer the effect of an exogenous increase in education. Effectively, we use the variety of changes that have occurred in education policy since the Second World War and variations in youth labour markets to provide an estimate of the effect of an additional year of schooling on male earnings. Our current analysis uses the General Household Survey, pooled from 1974 to 1994, and finds that the results in our earlier work are surprisingly robust. We find that the estimated schooling/earnings relationship is close to linear and the estimates are essentially independent of how we unravel the simultaneity between schooling and wages.

This paper aims to investigate the impact of the UK Family Credit (FC) scheme (an in-work income transfer programme, i.e. one which is only payable to individuals who are in work) on the labour supply of lone mothers. The question is an important one because: in-work transfer schemes have recently been suggested as a device for encouraging labour force participation and reducing the severity of the disincentives associated with out-of-work transfer welfare programmes (such as Income Support (IS) in the UK, and Aid for Families with Dependent Children (AFDC) in the US); the USA has an in-work transfer scheme called the Earned Income Tax Credit (EITC) which has grown in importance in recent years; an extension of FC to individuals without children, to be known as Earnings Top-up (ET), has recently been proposed in the UK. One difficulty with such schemes is that their design may be unavoidably complicated or personally intrusive to ensure that they are targeted sufficiently finely. The result may be that individuals may: feel that participation in such programmes is stigmatised or not understand that they have some eligibility. The implication of such stigma or ignorance is that individuals may not participate in such programmes despite their potential entitlement. This problem is known as benefit non take-up or programme non-participation. The difficulties in estimating the impact of such transfer programmes on labour supply behaviour are that: labour supply and programme participation decisions may be determined simultaneously, for example, if labour supply depends on the marginal wage and the marginal wage depends on whether one participates in an income transfer programme; individuals may choose not to participate in the labour market if some in-work benefit is stigmatised so it is necessary to distinguish between individuals who choose this position from those individuals who would want to work (and, perhaps, claim the in-work benefit) but simply cannot find a job - i.e. labour market rationing. Here we estimate a labour supply model which allows for endogenous in-work welfare programme participation. We also allow for involuntary unemployment so as to distinguish between programme non-participation and an inability to obtain work and thereby generate an eligibility to the programme. This is applied to the UK Family Credit programme for a sample of 4248 lone mothers drawn from Family Expenditure Surveys 1978-92. The estimates suggest that FC plays an important role in overcoming the adverse incentive effects associated with Income Support and that it does this without having an adverse effect on the probability of working full-time. However, the probability of working would rise further (although the incentive to work full-time would be correspondingly diminished) were it not for some apparent stigma associated with FC participation.