Cash transfers and fertility: How the introduction and cancellation of a child benefit affected births and abortions

We study the effects of a universal child benefit on fertility, identifying separately the effects driven by conceptions and abortions. We focus on a generous lump-sum maternity allowance that was introduced in Spain in 2007 and cancelled in 2010. Using administrative, population-level data, we create a panel data set of the 50 Spanish provinces, with monthly data on birth and abortion rates between 2000 and 2017. Our identification is based on the timing of the introduction and cancellation of the policy (both its announcement and implementation), from which we infer when the effects on abortions and births can be expected. We find that the introduction of the policy led to a 3% increase in birth rates, due to both a decrease in abortions and an increase in conceptions. The announcement of the cancellation of the policy led to a transitory increase in birth rates of 4% just before the cancellation was implemented, driven by a short-term drop in abortions. The cancellation then led to a 6% drop in birth rates. Heterogeneity analysis suggests that the positive fertility effect of the benefit introduction was driven by high-skilled parents, while the negative impact of the cancellation was larger among low-skilled and out-of-labor-force parents, and in lower income, higher unemployment regions. We also find suggestive evidence that the child benefit had both a timing effect (“tempo”), so that some women had children earlier, and a level effect (“quantum”), where some women had more children than they would have had otherwise.