Traditional evaluation methods focus on short-run effects based on static models under the assumption of no indirect effects. This project designs a framework to evaluate the short- and long-run effects of large policies such as taxes, subsidies or welfare programmes. Such policies affect the incentives to save, work and invest in education, changing the whole life-cycle performance of affected individuals. The widespread direct effects may lead to spillover effects through price and tax adjustments. The aim is to understand and assess the impact of welfare policies on life-cycle decisions and the market as a whole, separating distributional, insurance and efficiency effects. This research concentrates on the new UK tax credits, modelling individual's decisions within a realistic institutional background. The structural approach followed allows for an ex-ante analysis and the comparison between alternative interventions and specific design options.