Child cash benefits and family expenditures: Evidence from the National Child Benefit

Income may improve child outcomes through two mechanisms: as a direct input into health and education, or indirectly, by reducing household financial stress. We exploit policy‐induced changes in refundable tax benefit income in Canada to study these two potential mechanisms. Our findings suggest that additional income may improve outcomes through both mechanisms: some benefit income is spent on direct education inputs, while some is spent on everyday items likely to improve the general conditions children face. Additionally, some families reduce spending on risky behaviour items. Spending responses to benefit generosity appear to vary by income and by child age.