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Did Australia's Baby Bonus Increase the Fertility Rate?

  • Robert Drago

    (Pennsylvania State University, USA)

  • Katina Sawyer

    (Pennsylvania State University, USA)

  • Karina M Shreffler

    (Oklahoma State University, USA)

  • Diana Warren


    (Institute of Applied Economic and Social Research, The University of Melbourne)

  • Mark Wooden


    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

In May 2004, the Australian government announced a "Baby Bonus" policy, paying women an initial A$3,000 per new child. We use household panel data from the Household, Income and Labour Dynamics in Australia Survey (N = 14,932) and a simultaneous equations approach to analyze the effects of this bonus on fertility intentions and ultimately births. The results indicate that opportunity costs influence intentions and births in predictable ways. Fertility intentions rose after the announcement of the Baby Bonus, and the birth rate is estimated to have risen modestly as a result. The marginal cost to the government for an additional birth is estimated to be at least A$124,000.

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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2009n01.

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Length: 30 pages
Date of creation: Feb 2009
Date of revision:
Handle: RePEc:iae:iaewps:wp2009n01
Contact details of provider: Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
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  1. 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, August.
  2. Peter Mcdonald, 2006. "Low Fertility and the State: The Efficacy of Policy," Population and Development Review, The Population Council, Inc., vol. 32(3), pages 485-510.
  3. John Ermisch, 1988. "Econometric Analysis of Birth Rate Dynamics in Britain," Journal of Human Resources, University of Wisconsin Press, vol. 23(4), pages 563-576.
  4. Anna Christina D'Addio & Marco Mira d'Ercole, 2005. "Trends and Determinants of Fertility Rates: The Role of Policies," OECD Social, Employment and Migration Working Papers 27, OECD Publishing.
  5. Anne Gauthier, 2007. "The impact of family policies on fertility in industrialized countries: a review of the literature," Population Research and Policy Review, Springer, vol. 26(3), pages 323-346, June.
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