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A re-appraisal of the fertility response to the Australian baby bonus

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  • Sinclair, Sarah
  • Boymal, Jonathan
  • de Silva, Ashton

Abstract

The Australian baby bonus offering parents $3,000 on the birth of a new child was announced on May 11 2004. The availability of five years of birth data following the introduction of the baby bonus allows for a more comprehensive analysis of the policy implications than is current in the literature. The focus of this paper is to identify if there is a positive fertility choice response to the introduction of the Australian baby bonus policy and if this response is sustained over time. To do this 19 years of birth and macroeconomic data, beginning 1990, is analysed using an unobservable components model. The results indicate a significant increase in birth numbers ten months following the announcement of the baby bonus, and this overall increase was sustained up to the end of the observed period. A cumulative growth in birth numbers which commenced in January 2006 slows in 2008 and 2009. It is suggested that the initial increase in births, identified in March 2005, is a direct fertility response to the introduction of the policy and that the subsequent change in the growth of birth numbers may be the result of a delayed effect working through a number of channels. It is estimated that approximately 119,000 births are attributable to the baby bonus over the period, at an approximate cost of $39000 per extra child.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27580.

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Date of creation: 20 Dec 2010
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Handle: RePEc:pra:mprapa:27580

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Keywords: Fertility Rate; Time Series; baby bonus;

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  1. Leibenstein, Harvey, 1975. "The Economic Theory of Fertility Decline," The Quarterly Journal of Economics, MIT Press, vol. 89(1), pages 1-31, February.
  2. Becker, Gary S & Barro, Robert J, 1988. "A Reformulation of the Economic Theory of Fertility," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 1-25, February.
  3. Edith Duclos & Pierre Lefebvre & Philip Merrigan, 2001. "A 'Natural Experiment' on the Economics of Storks: Evidence on the Impact of Differential Family Policy on Fertility Rates in Canada," Cahiers de recherche CREFE / CREFE Working Papers 136, CREFE, Université du Québec à Montréal.
  4. Gary S. Becker & Nigel Tomes, 1976. "Child Endowments, and the Quantity and Quality of Children," NBER Working Papers 0123, National Bureau of Economic Research, Inc.
  5. Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-93, Nov.-Dec..
  6. Becker, Gary S & Lewis, H Gregg, 1973. "On the Interaction between the Quantity and Quality of Children," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages S279-88, Part II, .
  7. Kevin Milligan, 2002. "Subsidizing the Stork: New Evidence on Tax Incentives and Fertility," NBER Working Papers 8845, National Bureau of Economic Research, Inc.
  8. V. Joseph Hotz & Robert A. Miller, 1992. "Conditional Choice Probabilities and the Estimation of Dynamic Models," Working Papers 9202, Harris School of Public Policy Studies, University of Chicago.
  9. V. Joseph Hotz & Robert A. Miller, . "An Empirical Analysis of Life Cycle Fertility and Female Labor Supply," University of Chicago - Population Research Center 86-15, Chicago - Population Research Center.
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Cited by:
  1. Adda, Jérôme & Dustmann, Christian & Stevens, Katrien, 2011. "The Career Costs of Children," IZA Discussion Papers 6201, Institute for the Study of Labor (IZA).
  2. 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.

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