Public Support, Private Choices: The 2021 Child Tax Credit and Parental Spending Behavior

• In Event: Examining the Reach and Impact of Tax Credits and Transfers at the State and Federal Level

Abstract

Understanding the mechanisms that link family income with child well-being is critical for designing effective child transfer policy. In this study, I examine household spending during the 2021 expanded Child Tax Credit (CTC) advance payment period to test theories of intrahousehold allocation decision-making. I argue that examining parents' spending on “temptation goods”—goods they value, but which may harm children—can provide a unique window into parental motivations.

My data is drawn from the Nielsen Consumer Panel (NCP; formerly Nielsen Homescan). The NCP continually tracks the consumption habits of over 40,000 US households and is considered one of the most accurate and detailed data sources on consumer purchases. I use difference-in-differences and regression discontinuity techniques to estimate the causal effect of CTC advance payments on consumption of temptation and child-exclusive goods.

This paper contributes to the literature on intrahousehold resource allocation by providing insight into how parents balance self-interest and altruism when making spending decisions. These insights can inform the design of child-focused transfer policies by suggesting whether unrestricted cash transfers effectively promote children's economic well-being.

Author

• Emily Elizabeth Dobson, University of Maryland, College Park
  Presenting Author