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Targeting Fertility and Female Participation Through the Income Tax

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Author Info
Azmat, Ghazala () (Universitat Pompeu Fabra)
Gonzalez, Libertad () (Universitat Pompeu Fabra)

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Abstract

We evaluate the effect of a 2003 reform in the Spanish income tax on fertility and the employment of mothers with small children. The reform introduced a tax credit for working mothers with children under the age of three, while also increasing child deductions for all households with children. Theoretically, given the interplay of these two components, the expected effect of the reform is ambiguous on both outcomes. We find that the combined reforms significantly increased both fertility (by almost five percent) and the employment rate of mothers with children under three (by two percent). These effects were more pronounced among less-educated women. In addition, to disentangle the impact of the two reform components, we use an earlier reform that increased child deductions in 1999. We find that the child deductions affect mothers' employment negatively, which implies that the 2003 tax credit would have increased employment even more (up to five percent) in the absence of the change in child deductions.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4405.

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Length: 2009 pages
Date of creation: Sep 2009
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Publication status: forthcoming in: Labour Economics, 2009
Handle: RePEc:iza:izadps:dp4405

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Related research
Keywords: child subsidy; tax credit; female labor force participation; fertility; family policy;

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Find related papers by JEL classification:
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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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. Daniela Del Boca & Marilena Locatelli, 2006. "The Determinants of Motherhood and Work Status: a Survey," CHILD Working Papers wp15_06, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY. [Downloadable!]
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  2. 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). [Downloadable!] (restricted)
  3. Carrasco, R., 1998. "Binary Choice with Binary Endogenous Regressors in Panel Data: Estimating the Effect of Fertility on Female Labour Participation," Papers 9805, Centro de Estudios Monetarios Y Financieros-.
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  4. Angrist, Joshua D & Evans, William N, 1998. "Children and Their Parents' Labor Supply: Evidence from Exogenous Variation in Family Size," American Economic Review, American Economic Association, vol. 88(3), pages 450-77, June. [Downloadable!] (restricted)
    Other versions:
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(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. 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). [Downloadable!]
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