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Subsidizing the Stork: New Evidence on Tax Incentives and Fertility

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  • Kevin Milligan

Abstract

Variation in tax policy presents an opportunity to estimate the responsiveness of fertility to prices. This paper exploits the introduction of a pro-natalist transfer policy in the Canadian province of Quebec that paid up to C$8,000 to families having a child. I implement a quasi-experimental strategy by forming treatment and control groups defined by time, jurisdiction, and family type. This permits a triple-difference estimator to be implemented -- both on the program's introduction and cancellation. Furthermore, the incentive was available broadly, rather than to a narrow subset of the population as studied in the literature on AFDC and fertility. This provides a unique opportunity to investigate heterogeneous responses. I find a strong effect of the policy on fertility, and some evidence of a heterogeneous response that may help reconcile these results with the AFDC literature.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8845.

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Date of creation: Mar 2002
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Publication status: published as Kevin Milligan, 2005. "Subsidizing the Stork: New Evidence on Tax Incentives and Fertility," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 539-555, 06.
Handle: RePEc:nbr:nberwo:8845

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  7. Robert W. Fairlie & Rebecca A. London, 1997. "The effect of incremental benefit levels on births to AFDC recipients," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 16(4), pages 575-597.
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  17. 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.
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