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Subsidizing the Stork: New Evidence on Tax Incentives and Fertility

  • Kevin Milligan

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
Note: CH PE
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  6. Williamson Hoyne, Hilary, 1997. "Does welfare play any role in female headship decisions?," Journal of Public Economics, Elsevier, vol. 65(2), pages 89-117, August.
  7. Pierre Lefebvre & Phillip Merrigan & Martin Dooley, . "Lone Female Headship and Welfare Policy in Canada," Canadian International Labour Network Working Papers 08, McMaster University.
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  10. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
  11. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1984. "Income distribution policies with endogenous fertility," Journal of Public Economics, Elsevier, vol. 24(2), pages 221-230, July.
  12. 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, .
  13. Rosenzweig, Mark R & Schultz, T Paul, 1985. "The Demand for and Supply of Births: Fertility and Its Life Cycle Consequences," American Economic Review, American Economic Association, vol. 75(5), pages 992-1015, December.
  14. Carol Harvey & Michael J. Camasso & Radha Jagannathan, 2000. "Evaluating Welfare Reform Waivers under Section 1115," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 165-188, Fall.
  15. 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., vol. 16(4), pages 575-597.
  16. Batina, Raymond G., 1986. "The optimal linear income tax with tax credits contingent on fertility," Journal of Public Economics, Elsevier, vol. 30(2), pages 219-235, July.
  17. Shelley A. Phipps, 1998. "What Is The Income "Cost Of A Child"? Exact Equivalence Scales For Canadian Two-Parent Families," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 157-164, February.
  18. 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.
  19. Rosenzweig, Mark R & Wolpin, Kenneth I, 1980. "Life-Cycle Labor Supply and Fertility: Causal Inferences from Household Models," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 328-48, April.
  20. Heckman, James J & Walker, James R, 1990. "The Relationship between Wages and Income and the Timing and Spacing of Births: Evidence from Swedish Longitudinal Data," Econometrica, Econometric Society, vol. 58(6), pages 1411-41, November.
  21. Douglas E. Hyatt & William J. Milne, 1991. "Can Public Policy Affect Fertility?," Canadian Public Policy, University of Toronto Press, vol. 17(1), pages 77-85, March.
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