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Does Fertility Respond to Financial Incentives?

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Author Info
Laroque, Guy () (CREST-INSEE)
Salanié, Bernard () (Columbia University)

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Abstract

There has been little empirical work evaluating the sensitivity of fertility to financial incentives at the household level. We put forward an identification strategy that relies on the fact that variation of wages induces variation in benefits and tax credits among "comparable households. We implement this approach by estimating a discrete choice model of female participation and fertility, using individual data from the French Labor Force Survey and a fairly detailed representation of the French tax-benefit system. Our results suggest that financial incentives play a notable role in determining fertility decisions in France, both for the first and for the third child. As an example, an unconditional child benefit with a direct cost of 0.3% of GDP might raise total fertility by about 0.3 point.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3575.

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Length: 46 pages
Date of creation: Jul 2008
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Handle: RePEc:iza:izadps:dp3575

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Related research
Keywords: population; fertility; incentives; benefits;

Other versions of this item:

Find related papers by JEL classification:
J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
H5 - Public Economics - - National Government Expenditures and Related Policies

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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. Richard Blundell & Alan Duncan & Costas Meghir, 1998. "Estimating Labor Supply Responses Using Tax Reforms," Econometrica, Econometric Society, vol. 66(4), pages 827-862, July.
    Other versions:
  2. Melissa Schettini Kearney, 2002. "Is There an Effect of Incremental Welfare Benefits on Fertility Behavior? A Look at the Family Cap," NBER Working Papers 9093, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Besley, Timothy & Case, Anne, 2000. "Unnatural Experiments? Estimating the Incidence of Endogenous Policies," Economic Journal, Royal Economic Society, vol. 110(467), pages F672-94, November. [Downloadable!] (restricted)
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  4. Del Boca, Daniela, 2002. "The Effect of Child Care and Part Time Opportunities on Participation and Fertility Decisions in Italy," IZA Discussion Papers 427, Institute for the Study of Labor (IZA). [Downloadable!]
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  5. Hidehiko Ichimura & Christopher Taber, 2002. "Semiparametric Reduced-Form Estimation of Tuition Subsidies," American Economic Review, American Economic Association, vol. 92(2), pages 286-292, May. [Downloadable!]
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  6. Alma Cohen & Rajeev Dehejia & Dmitri Romanov, 2007. "Do Financial Incentives Affect Fertility?," NBER Working Papers 13700, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Apps, Patricia & Rees, Ray, 2001. "Fertility, Female Labor Supply and Public Policy," IZA Discussion Papers 409, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Michael P. Keane & Kenneth I. Wolpin, 2007. "Exploring The Usefulness Of A Nonrandom Holdout Sample For Model Validation: Welfare Effects On Female Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1351-1378, November. [Downloadable!] (restricted)
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  9. 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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  10. Cigno, Alessandro, 1986. "Fertility and the Tax-Benefit System: A Reconsideration of the Theory of Family Taxation," Economic Journal, Royal Economic Society, vol. 96(384), pages 1035-51, December. [Downloadable!] (restricted)
  11. Melissa Schettini Kearney, 2004. "Is There an Effect of Incremental Welfare Benefits on Fertility Behavior?: A Look at the Family Cap," Journal of Human Resources, University of Wisconsin Press, vol. 39(2). [Downloadable!] (restricted)
  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)
Full references

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. Alma Cohen & Rajeev Dehejia & Dmitri Romanov, 2007. "Do Financial Incentives Affect Fertility?," NBER Working Papers 13700, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  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. [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. Sophie Buffeteau & Damien Echevin, 2008. "Taxation and marriage: Evidence from a natural experiment in France," Cahiers de recherche 08-01, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke. [Downloadable!]
  5. Daniela Del Boca & Robert M. Sauer, 2006. "Life Cycle Employment and Fertility Across Institutional Environments," Carlo Alberto Notebooks 20, Collegio Carlo Alberto. [Downloadable!]
    Other versions:
  6. Bas Groezen & Lex Meijdam, 2008. "Growing old and staying young: population policy in an ageing closed economy," Journal of Population Economics, Springer, vol. 21(3), pages 573-588, July. [Downloadable!] (restricted)
    Other versions:
  7. Mayssun El-Attar, 2007. "Trust, Child Care Technology Choice and Female Labor Force Participation," IZA Discussion Papers 3135, Institute for the Study of Labor (IZA). [Downloadable!]
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