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Does Fertility Respond to Financial Incentives?

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  • Laroque, Guy

    ()
    (CREST-INSEE)

  • Salanié, Bernard

    ()
    (Columbia University)

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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Bibliographic 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
Date of revision:
Handle: RePEc:iza:izadps:dp3575

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Keywords: population; fertility; incentives; benefits;

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References

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  1. Apps, Patricia & Rees, Ray, 2001. "Fertility, Female Labor Supply and Public Policy," IZA Discussion Papers 409, Institute for the Study of Labor (IZA).
  2. Michael P. Keane & Kenneth I. Wolpin, 2006. "Exploring the Usefulness of a Non-Random Holdout Sample for Model Validation: Welfare Effects on Female Behavior," PIER Working Paper Archive 06-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  3. Timothy Besley & Anne Case, 1994. "Unnatural Experiments? Estimating the Incidence of Endogenous Policies," NBER Working Papers 4956, National Bureau of Economic Research, Inc.
  4. Richard Blundell & Alan Duncan & Costas Meghir, 1995. "Estimating labour supply responses using tax reforms," IFS Working Papers, Institute for Fiscal Studies W95/07, Institute for Fiscal Studies.
  5. Kevin Milligan, 2002. "Subsidizing the Stork: New Evidence on Tax Incentives and Fertility," NBER Working Papers 8845, National Bureau of Economic Research, Inc.
  6. 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, Econometric Society, vol. 58(6), pages 1411-41, November.
  7. 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).
  8. Liliane Brouillette & Claude Felteau & Pierre Lefebvre, 1993. "Les effets des impôts et des allocations familiales sur les comportements de fécondité et de travail des Canadiennes: résultats d'un modèle de choix discrets," Cahiers de recherche CREFE / CREFE Working Papers, CREFE, Université du Québec à Montréal 10, CREFE, Université du Québec à Montréal.
  9. Alma Cohen & Rajeev Dehejia & Dmitri Romanov, 2007. "Do Financial Incentives Affect Fertility?," NBER Working Papers 13700, National Bureau of Economic Research, Inc.
  10. 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.
  11. Cigno, Alessandro, 1986. "Fertility and the Tax-Benefit System: A Reconsideration of the Theory of Family Taxation," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 96(384), pages 1035-51, December.
  12. David Blau & Philip Robins, 1989. "Fertility, Employment, and Child-Care Costs," Demography, Springer, Springer, vol. 26(2), pages 287-299, May.
  13. Hidehiko Ichimura & Christopher Taber, 2002. "Semiparametric reduced form estimation of tuition subsidies," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP01/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
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  1. Flight's right
    by chris dillow in Stumbling and Mumbling on 2010-11-25 17:39:08
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