The labour market impact of the working families' tax credit In the Fiscal Studies article, the authors use a discrete behavioural model of household labour supply to simulate labour supply responses. They control for fixed and childcare costs, and unobserved heterogeneity. The simulation experiments with a number of scenarios regarding the take-up of the credit, entry wage level and hourly childcare price. See also a briefing note on the same subject.
Recent research suggests a modest labour market response to the new tax credit.
Yet it raises a number of further policy questions. It looks at the characteristics of likely recipients and discusses how the WFTC will affect work incentives for different types of households. The paper then goes on to discuss a series of issues that deserve attention and discussion in the context of the UK reform, and perhaps more generally in the consideration of policies of this type.