Family Benefits and Fertility: An Econometric Analysis

Citation: Gauthier, A. H., Hatzius, J. Family Benefits and Fertility: An Econometric Analysis.
Internet Archive Scholar (search for fulltext): Family Benefits and Fertility: An Econometric Analysis
Tagged:

Summary

Notes: This paper addresses the question of whether higher governmental support for families has a positive effect on fertility by encouraging parents to have more children. The analysis was based on differences and similitudes across countries in the levels of governmental support for families in 22 industrialized countries for the period 1970 to 1990. The family benefits that the authors consider fall into two categories: cash benefits and maternity benefits. They use only a subset of cash and in-kind benefits, omitting benefits related to child-care, housing, education, and health, as well as benefits targeted at low-income families and lone-parent families. They considered indices based on the value of family allowances. They included the amount received by a one-child, a two-child, and a three-child family divided by the average monthly men's wage in manufacturing in each country. They also considered the effects of maternity benefits. There are two variables that were used to represent maternity leave: the duration of the leave and the pay received during this period as a percentage of regular earnings. The control variables included in the equation were log of average men's and women's hourly wages in manufacturing and the unemployment rate. The results are consistent with the view that the decision to bear a child is affected by its direct cost, which lowered by cash assistance but not by the opportunity to take time out from work. The effect of maternity pay was insignificant (possibly due to lack of variation). Direct cash benefits have positive and significant effects on fertility. Increasing assistance for the first child has a greater effect on fertility than for subsequent children, therefore targeting benefits specifically at the third child is unlikely to increase fertility. There appears to be a limited effect, on the order of 0.07 children per woman in the long-run for benefits 25% higher than average. The short-run effect of benefits is smaller, only 0.01 children per woman. The authors then group the countries into four categories and allow the coefficients to vary for each group. These results show that there is no evidence that cash benefits affect fertility in the Anglo-Saxon countries. However, benefits have a large and consistent effect in the Scandinavian countries. The countries in the Continental and Southern Europe fall between these two extremes. In Southern Europe, benefits for only the first child have a significant effect, while in the Continental group the effect becomes stronger for the two-child and three-child benefit measures, especially in the long-run. The possible explanation is that in Southern Europe, the level of benefits is usually independent of the birth-order of the child, however, in Continental Europe and Scandinavian countries, benefits tend to rise monotonically with birth-order.