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Does Welfare Reform Affect Fertility? Evidence from the UK

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  • Mike Brewer
  • Anita Ratcliffe
  • Sarah Smith

    ()

Abstract

This paper presents evidence on the fertility effect of welfare from a set of reforms that took place in the UK in 1999 and that substantially increased support for poorer families with children. The reforms, including the introduction of the Working Families Tax Credit and an increase in means-tested income support, raised benefits by up to 10 per cent of household income. We exploit the fact that the reforms were targeted on low-income households and use a differences-in-differences approach to evaluate their impact on fertility. A priori, the fertility effect of the reforms is ambiguous because WFTC has pro-employment effects. In practice, these are more important for lone mothers and we therefore focus on women in couples where we expect the reforms to have a positive effect on births. We find that the reforms raised the probability of birth among women in couples by around 10 per cent (implying an elasticity of 0.22). In line with previous work, the effect is greatest for first births.

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Bibliographic Info

Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 07/177.

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Length: 32 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:bri:cmpowp:07/177

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Keywords: Welfare reform; Fertility; Working Families Tax Credit;

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References

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  1. Guy Laroque & Bernard Salanie, 2008. "Does Fertility Respond to Financial Incentives?," Discussion Papers 0708-15, Columbia University, Department of Economics.
  2. Williamson Hoyne, Hilary, 1997. "Does welfare play any role in female headship decisions?," Journal of Public Economics, Elsevier, vol. 65(2), pages 89-117, August.
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  6. Brewer, M., 2003. "The new tax credits," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
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  12. Marco Francesconi & Wilbert van der Klaauw, 2007. "The Socioeconomic Consequences of "In-Work" Benefit Reform for British Lone Mothers," Journal of Human Resources, University of Wisconsin Press, vol. 42(1).
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  14. Fraser, Clive D, 2001. "Income Risk, the Tax-Benefit System and the Demand for Children," Economica, London School of Economics and Political Science, vol. 68(269), pages 105-25, February.
  15. Guy Laroque & Bernard Salanié, 2003. "Fertility and Financial Incentives in France," Working Papers 2003-32, Centre de Recherche en Economie et Statistique.
  16. Paul Gregg & Susan Harkness, 2003. "Welfare Reform and Lone Parents Employment in the UK," The Centre for Market and Public Organisation 03/072, Department of Economics, University of Bristol, UK.
  17. Kevin Milligan, 2005. "Subsidizing the Stork: New Evidence on Tax Incentives and Fertility," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 539-555, August.
  18. Dan Anderberg, 2007. "Tax Credits, Income Support and Partnership Decisions," CESifo Working Paper Series 2147, CESifo Group Munich.
  19. Reagan Baughman & Stacy Dickert-Conlin, 2003. "Did Expanding the EITC Promote Motherhood?," American Economic Review, American Economic Association, vol. 93(2), pages 247-251, May.
  20. Brewer, Mike & Duncan, Alan & Shephard, Andrew & Suarez, Maria Jose, 2006. "Did working families' tax credit work? The impact of in-work support on labour supply in Great Britain," Labour Economics, Elsevier, vol. 13(6), pages 699-720, December.
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Citations

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Cited by:
  1. Anderberg, Dan & Chevalier, Arnaud & Wadsworth, Jonathan, 2011. "Anatomy of a health scare: Education, income and the MMR controversy in the UK," Journal of Health Economics, Elsevier, vol. 30(3), pages 515-530, May.
  2. Ohinata, Asako, 2008. "Fertility Response to Financial Incentives-Evidence from the Working Families Tax Credit in the UK," The Warwick Economics Research Paper Series (TWERPS) 851, University of Warwick, Department of Economics.
  3. Haan, Peter & Wrohlich, Katharina, 2009. "Can Child Care Policy Encourage Employment and Fertility? Evidence from a Structural Model," IZA Discussion Papers 4503, Institute for the Study of Labor (IZA).
  4. Azmat, Ghazala & González, Libertad, 2010. "Targeting fertility and female participation through the income tax," Labour Economics, Elsevier, vol. 17(3), pages 487-502, June.
  5. REINSTADLER Anne, 2011. "Luxembourg and France: Comparable Family Benefits, Comparable Fertility Levels?," CEPS/INSTEAD Working Paper Series 2011-65, CEPS/INSTEAD.
  6. Jessica Todd & Paul Winters & Guy Stecklov, 2011. "Evaluating the impact of conditional cash transfer programs on fertility: the case of the Red de Protección Social in Nicaragua," Journal of Population Economics, Springer, vol. 25(1), pages 267-290, October.
  7. Ian Dey & Fran Wasoff, 2010. "Another Child? Fertility Ideals, Resources and Opportunities," Population Research and Policy Review, Springer, vol. 29(6), pages 921-940, December.
  8. Paul Gregg & Lindsey Macmillan, 2009. "Family Income and Education in the Next Generation: Exploring income gradients in education for current cohorts of youth," The Centre for Market and Public Organisation 09/223, Department of Economics, University of Bristol, UK.

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