The Effect of Universal Child Benefits on Female Labor Supply and Household Expenditure: Case of Mongolia

Abstract

This study investigates the causal impact of Mongolia’s universal child benefit program on female labor supply and household expenditure using Difference-In-Difference-In-Differences approach. In addition, we focused on the how households spend their benefit income. To examine the relationship between benefit income and household expenditures, we use Seemingly Unrelated Regression model. We use cross-sectional data from the Integrated Household Income and Expenditure Survey with Living Standards Measurement Survey of 2002/2003 and Household Socio-Economic Survey of 2007/2008 from the National Statistical Office of Mongolia. We find that between 2002/2003 and 2007/2008, women with children decreased their relative labor force participation by 12.27 percentage points. The estimated adverse effects of child benefit program on labor force participation are proved by linear regression of annual hours of worked. When we estimate the effects of UCBP on worked hours conditional on hours exceeding zero, women with children decreased their relative working hours conditional on working by 155.32 hours. Moreover, we find that the effects of UCBP on household expenditures depending on household behavior. For households involved in agriculture, households receiving benefit income increased their expenditures on non-durable goods than food and durable goods. Contrary, households not involved in agriculture, they increased their expenditures on food items than durable and non-durable goods. For the low and middle-income group, there are positive UCBP effects on the broad variety of food and non-durable expenditure categories. However, there have been almost no significant effects of UCBP on the expenditures for the high-income group. In addition, we found that the income transfers are shared between children and their parents.