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

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References

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  1. Robert Moffitt, 1994. "Welfare Effects on Female Headship with Area Effects," Journal of Human Resources, University of Wisconsin Press, vol. 29(2), pages 621-636.
  2. John Mullahy, 1999. "Interaction Effects and Difference-in-Difference Estimation in Loglinear Models," NBER Technical Working Papers 0245, National Bureau of Economic Research, Inc.
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  4. Robert A Moffitt, 2000. "Welfare Benefits and Female Headship in US Time Series," Economics Working Paper Archive 434, The Johns Hopkins University,Department of Economics.
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  8. Kevin Milligan, 2002. "Subsidizing the Stork: New Evidence on Tax Incentives and Fertility," NBER Working Papers 8845, National Bureau of Economic Research, Inc.
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  12. 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.
  13. 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.
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  17. Felteau, Claude & Lefebvre, Pierre & Merrigan, Philip & Brouillette, Liliane, 1997. "Conjugalité et fécondité des femmes canadiennes : un modèle dynamique estimé à l’aide d’une série de coupes transversales," L'Actualité Economique, Société Canadienne de Science Economique, vol. 73(1), pages 233-263, mars-juin.
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Cited by:
  1. Beatrice Brunner & Andreas Kuhn, 2011. "Financial Incentives, the Timing of Births, Birth Complications, and Newborns’ Health: Evidence from the Abolition of Austria’s Baby Bonus," NRN working papers 2011-16, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  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. Michal Myck & Anna Kurowska & Michal Kundera, 2013. "Financial support for families with children and its trade-offs: balancing redistribution and parental work incentives," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 13(2), pages 59-83, December.
  4. Brunner, Beatrice & Kuhn, Andreas, 2011. "Financial Incentives, the Timing of Births, Birth Complications, and Newborns' Health: Evidence from the Abolition of Austria's Baby Bonus," IZA Discussion Papers 6141, Institute for the Study of Labor (IZA).
  5. Ross Guest, 2013. "Population Ageing and Productivity: Implications and Policy Options for New Zealand," Treasury Working Paper Series 13/21, New Zealand Treasury.
  6. Daniel Parent & Ling Wang, 2002. "Tax Incentives and Fertility in Canada: Permanent vs. Transitory Effects," CIRANO Working Papers 2002s-29, CIRANO.
  7. 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.
  8. Sinclair, Sarah & Boymal, Jonathan & de Silva, Ashton J, 2012. "Is the fertility response to the Australian baby bonus heterogeneous across maternal age? Evidence from Victoria," MPRA Paper 42725, University Library of Munich, Germany.
  9. Sarah Sinclair & Jonathan Boymal & Ashton De Silva, 2012. "A Re‐Appraisal of the Fertility Response to the Australian Baby Bonus," The Economic Record, The Economic Society of Australia, vol. 88(s1), pages 78-87, 06.
  10. Beatrice Brunner & Andreas Kuhn, 2011. "Financial incentives, the timing of births, birth complications, and newborns' health: Evidence from the abolition of Austria's baby bonus," ECON - Working Papers 048, Department of Economics - University of Zurich.
  11. Ralph Lattimore & Clinton Pobke, 2008. "Recent Trends in Australian Fertility," Staff Working Papers 0806, Productivity Commission, Government of Australia.
  12. 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.
  13. Michal Myck & Anna Kurowska & Michal Kundera, 2013. "Financial Support for Families with Children and Its Trade-Offs: Balancing Redistribution and Parental Work Incentives," Discussion Papers of DIW Berlin 1315, DIW Berlin, German Institute for Economic Research.

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