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Fertility Response to Financial Incentives-Evidence from the Working Families Tax Credit in the UK

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Author Info
Ohinata, Asako (Dept. of Economics, University of Warwick)
Abstract

The introduction of the 1999 Working Families Tax Credit (WFTC) in the UK encouraged low income families with children to enter the labor market. The tax credit, however, may have had the unintended side effect of increasing the childbearing of these households. While many studies have looked at the importance of WFTC on the female labor supply, only few have estimated the impact it had on fertility decisions of British families. This paper employs the 1995 to 2003 British Household Panel Survey and identifies the policy impact of WFTC by observing the change in the probability of birth as well as the timing of birth using the difference in differences estimator. The main findings of this paper suggest that single women responded to the policy introduction by reducing the probability of birth and prolonging the birth intervals across all birth parity. For women with partners, on the other hand, the estimates indicate that financial incentives did not encourage them to enter motherhood but it rather induced women to have their second birth quicker.

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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 851.

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Length: 36 pages
Date of creation: 2008
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Handle: RePEc:wrk:warwec:851

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Related research
Keywords: Fertility ; Welfare policy ; Working Families Tax Credit ; Difference-in-Differences;

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Find related papers by JEL classification:
J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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