This study examines family expenditures and how they respond to the provision of family cash transfers, particularly among higher-income families. Naming cash benefits with explicit reference to ‘families’ or ‘children’ can nudge households into labelling the extra cash for financial investments in children. Labelling has mainly been assessed among lower-income families. Yet if also higher-income families engage in labelling, there could be unintended consequences on the often stark disparities in child-related investments across the socio-economic divide. Drawing on 2006–2019 data from Household, Income, and Labour Dynamics in Australia (HILDA), the study relies on reforms to Australia's Family Tax Benefit to ‘reveal’ expenditure responses among higher-income families via an instrumented difference-in-differences design. Higher-income households seem to earmark a family cash transfer for children's clothing but not for children's education fees, while they also assign money to adult clothing. Lower-income households, differently, seem to engage in more clear-cut, child-oriented labelling, at the expense of adult-assignable goods. Family cash transfers can nudge households into spending more money on their children across the socioeconomic divide, but not necessarily homogeneously so. Providing more well-off families with modest transfers might thus have limited perverse effects on inequality in family expenditures.
Bibliographical noteFunding Information:
This study was supported by a grant from the Netherlands Organization for Scientific Research ( NWO MaGW VIDI grant no. 452-17-005 to R.K. ) and by a grant from the European Research Council (ERC StG grant no. 757210 to R.K. ). Data in this paper come from the Household, Income and Labour Dynamics in Australia (HILDA) survey, General Release 19, accessed via the Australian Data Archive (ADA). The content of this paper is the sole responsibility of the authors.