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Does Fertility Respond to Financial Incentives?

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  • Guy Laroque
  • Bernard Salanié

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.

Suggested Citation

  • Guy Laroque & Bernard Salanié, 2008. "Does Fertility Respond to Financial Incentives?," CESifo Working Paper Series 2339, CESifo.
  • Handle: RePEc:ces:ceswps:_2339
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    More about this item

    Keywords

    population; fertility; incentives; benefits;
    All these keywords.

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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