Issues arising in tax and benefit modelling: The case of family credit

Family Credit and ist successor the WFTC, have been central to the British welfare reform debate in reacent years. This debate in informed by tax benefit modelling, yet accurate modelling of Family Credit is fraught with potential problems. The main model input data are found to under-sample family credit recipients considerably, but those who it does sample seem representative of the family credit recipient population. Substantial mismatch is found between those reporting family credit receipt and those modelled as entitled. We show that regression techniques can be used to adjust model results fort he fact of non take-up, but that data constraints leave no obvious way to deal with the equally significant problem of families who receive benefit but are not modelled as entiled. The difficulties posed by the input data´s under-sampling and by the significant number of claimants without modelled entitlement lead us finally to consider the use (and the limitations) of calibrating results.