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A 'Natural Experiment' on the Economics of Storks: Evidence on the Impact of Differential Family Policy on Fertility Rates in Canada

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Author Info
Edith Duclos (Human Resources Development Canada)
Pierre Lefebvre (Center for Research on Economic Fluctuations and Employment, UQAM)
Philip Merrigan (Center for Research on Economic Fluctuations and Employment, UQAM)

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Abstract

From the mid 1980's, the Canadian government froze or cut back the major traditional provisions targeted towards families with children. Faced with the lowest (and declining) fertility rate in Canada, the government of the province of Québec (where the population is mostly French) decided in 1986 to implement incrementally a variety of generous benefits (young children and new-born universal allowances contingent on birth rank, tax credits for dependent children, and family income tax reduction) to reverse the trend. In 1998, this policy was changed for a benefit targeted on family income to finance highly subsidized childcare services in the public sector. The 1986-1997 window offers a 'natural experiment' to evaluate the effects of generous tax and transfer policies on fertility. The paper uses the important change in family policy that occurred in only one province out of ten in Canada to identify the its treatment effects. Different data sets and a variety of methodological approaches are used in the analysis. First, the Vital Statistics by birth order (number of births per year as well as the number of women per age), from 1981 to 1997 for Québec and the Rest of Canada (ROC), permit the application of the Bongaarts-Feeney formula that accounts for the impact of changes in the quantum and tempo of fertility by birth order. Second, the preceding data are combined with a series of yearly repeated cross-sectional data sets to compute aggregate fertility transition rates for parities 1, 2 and 3 (women who are at risk of giving birth to a child each parity). A difference-in-differences estimator is calculated to identify the impact of the 1986-1996 'natural experiment'. Estimates are also computed using standard linear regression methods that control for other aggregate effects that could explain differences in fertility rates between Québec and the ROC. The results show that generous family benefits do have an effect on fertility transition rates. However, we cannot determine whether the benefits simply accelerated the decisions about having children while having no effects on the desired number of children.

À partir de 1986, le gouvernement du Québec a mis graduellement en place une série de mesures de soutien financier en faveur des familles (allocations universelles jeunes enfants et de naissance modulées selon le rang de naissances, crédit d'impôt et réduction d'impôt famille) afin de renverser la baisse importante de la fécondité. Durant la même période, le gouvernement fédéral réduisait son soutien financier à l'égard des familles. Ce changement de politique familiale provinciale unique au Québec offre une "expérience naturelle" permettant de mesurer l'effet des transferts et de la fiscalité sur la fécondité. Plusieurs types de données et de méthodes d'analyse sont utilisées pour identifier "l'effet traitement" de la politique au Québec. D'abord, les naissances selon le rang, l'année et l'âge de la mère pour le Québec et le Reste du Canada (RdC), permettent de distinguer, à l'aide de la formule proposée par Bongaarts-Feeney, l'effet de tempo de l'effet de quantum qui peuvent être associées aux changements de fécondité. Puis, les données précédentes sont combinées avec celles provenant d'une série de coupes transversales permettant de calculer des taux agrégés de transition entre différents rang de naissances (les femmes à risque de donner naissance à des enfants de rang 1, 2 et 3). Un estimateur de différence en différences est calculé pour identifier l'effet traitement de la politique. Puis, l'effet de la politique est estimé économétriquement en contrôlant les autres effets agrégés qui peuvant influencer les différences de fécondité entre le Québec et le RdC. Les résultats indiquent le soutien financier généreux à l'égard des enfants a augmenté la fécondité. Cependant, l'analyse ne permet pas de dire si l'aide financières a simplement accéléré la décision d'avoir des enfants tout en n'ayant aucun effet sur le nombre désiré d'enfants.

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Publisher Info
Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 136.

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Length: 49 pages
Date of creation: May 2001
Date of revision:
Handle: RePEc:cre:crefwp:136

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Related research
Keywords: natural experiment; fertility; family allowances; tax and transfers effects;

Other versions of this item:

Find related papers by JEL classification:
H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Douglas E. Hyatt & William J. Milne, 1991. "Can Public Policy Affect Fertility?," Canadian Public Policy, University of Toronto Press, vol. 17(1), pages 77-85, March. [Downloadable!] (restricted)
  2. Joseph Hotz, V. & Klerman, Jacob Alex & Willis, Robert J., 1993. "The economics of fertility in developed countries," Handbook of Population and Family Economics, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 7, pages 275-347 Elsevier. [Downloadable!] (restricted)
  3. Meyer, Bruce D, 1995. "Natural and Quasi-experiments in Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 151-61, April.
    Other versions:
  4. Walker, James R, 1995. "The Effect of Public Policies on Recent Swedish Fertility Behavior," Journal of Population Economics, Springer, vol. 8(3), pages 223-51, August.
    Other versions:
  5. Georgellis, Yannis & Wall, Howard J, 1992. "The Fertility Effect of Dependent Tax Exemptions: Estimates for the United States," Applied Economics, Taylor and Francis Journals, vol. 24(10), pages 1139-45, October.
  6. Liliane Brouillette & Claude Felteau & Pierre Lefebvre, 1993. "Les effets de la fiscalité sur les comportements de fécondité au Québec," Canadian Public Policy, University of Toronto Press, vol. 19(3), pages 260-278, September. [Downloadable!] (restricted)
  7. John Mullahy, 1999. "Interaction Effects and Difference-in-Difference Estimation in Loglinear Models," NBER Technical Working Papers 0245, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Chris Robinson & Nigel Tomes, 1982. "Family Labour Supply and Fertility: A Two-Regime Model," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 706-34, November. [Downloadable!] (restricted)
  9. Shelley A. Phipps, 1998. "What Is The Income "Cost Of A Child"? Exact Equivalence Scales For Canadian Two-Parent Families," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 157-164, February. [Downloadable!] (restricted)
  10. Rebecca M. Blank & Christine C. George & Rebecca A. London, 1994. "State Abortion Rates: The Impact of Policies, Providers, Politics, Demographics, and Economic Environment," NBER Working Papers 4853, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Kevin Milligan, 2002. "Subsidizing the Stork: New Evidence on Tax Incentives and Fertility," NBER Working Papers 8845, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Heckman, James J & Walker, James R, 1990. "The Relationship between Wages and Income and the Timing and Spacing of Births: Evidence from Swedish Longitudinal Data," Econometrica, Econometric Society, vol. 58(6), pages 1411-41, November. [Downloadable!] (restricted)
  13. Cigno, Alessandro & Ermisch, John, 1989. "A microeconomic analysis of the timing of births," European Economic Review, Elsevier, vol. 33(4), pages 737-760, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
  2. Daniel Parent & Christopher Worswick, 2004. "Qualifications et immigration : réforme de la grille d'admission du Québec et composition de la population d'immigrants s'établissant au Québec," CIRANO Project Reports 2004rp-08, CIRANO. [Downloadable!]
  3. Anne Gauthier, 2007. "The impact of family policies on fertility in industrialized countries: a review of the literature," Population Research and Policy Review, Springer, vol. 26(3), pages 323-346, June. [Downloadable!] (restricted)
  4. Daniel Parent & Ling Wang, 2002. "Tax Incentives and Fertility in Canada: Permanent vs. Transitory Effects," CIRANO Working Papers 2002s-29, CIRANO. [Downloadable!]
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