Tax credits, income support, and partnership decisions

This paper considers the potential impact of welfare benefits on the partnership status of women in the UK. Using recent policy reforms to identify the response rate, it was found that a £100/week welfare benefit “partnership penalty” reduces the probability of a woman having a partner by seven percentage points. The model is also used to explore the potential effects of the recent tax credit reforms on partnership rates; it was found that while the 1999 WFTC reform improved partnership incentives, this effect was effectively undone by the 2003 WTC/CTC reform.