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.
We argue that once one departs from simple classroom example, or 'stripped down life-cycle model', the empirical model for consumption growth can be made flexible enough to fit the main features of the data.
This paper asks to what extent simple approximations can be used to measure the welfare costs of tax reform and evaluates the magnitude of the biases for a plausible size tax reform.
