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Effects of income and the cost of children on fertility. Quasi-experimental evidence from Norway

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The relationship between income, cost of childrearing and fertility is of considerable political and theoretical interest. We utilize exogenous variation in family income and the direct cost of children to estimate causal effects on fertility. The variation comes from a regional child benefit and tax reform implemented in the northern municipalities of the Norwegian county Troms. The southern municipalities of the same county constitute a plausible and empirically similar control group. Individual-level multivariate analysis suggests that a reduced direct cost of children increases fertility, mainly among unmarried women in their early 20s. We find little evidence of income effects on fertility. Our results are robust to a variety of specifications, including a standard difference-indifference setup, and regional trend modeling. The findings indicate that lowering the direct cost of a child would shift childbearing to lower ages in Norway. However, a lower price of children is also likely to induce a shift towards non-union childbearing or childbearing in less stable unions.

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Paper provided by Statistics Norway, Research Department in its series Discussion Papers with number 828.

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Length: 40 pages
Date of creation: Nov 2015
Handle: RePEc:ssb:dispap:828
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  1. Walker, James R, 1995. "The Effect of Public Policies on Recent Swedish Fertility Behavior," Journal of Population Economics, Springer;European Society for Population Economics, vol. 8(3), pages 223-251, August.
  2. Marco Francesconi, 2002. "A Joint Dynamic Model of Fertility and Work of Married Women," Journal of Labor Economics, University of Chicago Press, vol. 20(2), pages 336-380, Part.
  3. Melissa Schettini Kearney, 2004. "Is There an Effect of Incremental Welfare Benefits on Fertility Behavior?: A Look at the Family Cap," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
  4. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
  5. Elina Vinberg & Rannveig Kaldager Hart & Torkild H. Lyngstad, 2015. "Increasingly stable or more stressful? Children and union dissolution across four decades Evidence from Norway," Discussion Papers 814, Statistics Norway, Research Department.
  6. Alma Cohen & Rajeev Dehejia & Dmitri Romanov, 2013. "Financial Incentives and Fertility," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 1-20, March.
  7. 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.
  8. Angrist, Joshua D & Evans, William N, 1998. "Children and Their Parents' Labor Supply: Evidence from Exogenous Variation in Family Size," American Economic Review, American Economic Association, vol. 88(3), pages 450-477, June.
  9. Adriaan Kalwij, 2010. "The impact of family policy expenditure on fertility in western Europe," Demography, Springer;Population Association of America (PAA), vol. 47(2), pages 503-519, May.
  10. Trond Petersen & Andrew M. Penner & Geir Høgsnes, 2011. "The Male Marital Wage Premium: Sorting Vs. Differential Pay," ILR Review, Cornell University, ILR School, vol. 64(2), pages 283-304, January.
  11. Whittington, Leslie A & Alm, James & Peters, H Elizabeth, 1990. "Fertility and the Personal Exemption: Implicit Pronatalist Policy in the United States," American Economic Review, American Economic Association, vol. 80(3), pages 545-556, June.
  12. Richard Crump & Gopi Shah Goda & Kevin J. Mumford, 2011. "Fertility and the Personal Exemption: Comment," American Economic Review, American Economic Association, vol. 101(4), pages 1616-1628, June.
  13. Besley, Timothy & Case, Anne, 2000. "Unnatural Experiments? Estimating the Incidence of Endogenous Policies," Economic Journal, Royal Economic Society, vol. 110(467), pages 672-694, November.
  14. Joshua Goldstein & Wolfgang Lutz & Sergei Scherbov, 2003. "Long-Term Population Decline in Europe: The Relative Importance of Tempo Effects and Generational Length," Population and Development Review, The Population Council, Inc., vol. 29(4), pages 699-707.
  15. Torkild Lyngstad & Marika Jalovaara, 2010. "A review of the antecedents of union dissolution," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 23(10), pages 257-292, August.
  16. Junsen Zhang & Jason Quan & Peter van Meerbergen, 1994. "The Effect of Tax-Transfer Policies on Fertility in Canada, 1921-88," Journal of Human Resources, University of Wisconsin Press, vol. 29(1), pages 181-201.
  17. Anne Gauthier, 2007. "The impact of family policies on fertility in industrialized countries: a review of the literature," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 26(3), pages 323-346, June.
  18. 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.
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