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Financial Incentives and Fertility


Alma Cohen


Tel Aviv University - Eitan Berglas School of Economics; Harvard Law School; National Bureau of Economic Research (NBER)

Rajeev H. Dehejia


New York University (NYU) - Robert F. Wagner Graduate School of Public Service; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA); CESifo

Dmitri Romanov


Government of the State of Israel - Israel Central Bureau of Statistics

April 30, 2009

CELS 2009 4th Annual Conference on Empirical Legal Studies Paper

Abstract:     
This paper investigates how fertility responds to changes in the price of a marginal child. We construct a large, individual-level panel data set of over 300,000 Israeli women during the period 1999–2005 with comprehensive information about their fertility histories, education, religious affiliation, ethnicity, and income. We exploit variation in Israel’s child subsidy program to identify changes in the price of a marginal child. We find a statistically significant and positive price effect on fertility: the marginal child subsidy increase the probability of pregnancy in a give year by 0.99 percentage point in our preferred specification. This positive effect is present for all religious and ethnic subgroups, including the Ultra-Orthodox Jewish population who’s social and religious norms discourage family planning. There is also a significant price effect on fertility among women who are close to the end of their lifetime fertility, suggesting that at least part of the effect that we estimate is due to a reduction in total fertility. As expected, the child subsidy has the strongest effect for households in the lower range of the income distribution, and it weakens with income. Finally, we investigate the effect that changes in the household income have on fertility choices, using the lag of the husband’s income as an instrument for the current household income. Consistent with Becker (1960) and Becker and Tomes (1976), we find that the income effect is small in magnitude and is negative at low income levels and positive at high income levels.

Number of Pages in PDF File: 45

Keywords: fertility, child subsidies, child allowances

JEL Classification: D1, H31, I38, J13, K36

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Date posted: August 6, 2009 ; Last revised: November 16, 2009

Suggested Citation

Cohen, Alma and Dehejia, Rajeev H. and Romanov, Dmitri, Financial Incentives and Fertility (April 30, 2009). CELS 2009 4th Annual Conference on Empirical Legal Studies Paper. Available at SSRN: http://ssrn.com/abstract=1443378 or http://dx.doi.org/10.2139/ssrn.1443378

Contact Information

Alma Cohen (Contact Author)
Tel Aviv University - Eitan Berglas School of Economics ( email )
Ramat Aviv, Tel Aviv, 69978
Israel
Harvard Law School ( email )
Cambridge, MA 02138
United States
(617) 496-4099 (Phone)
(617) 812-0554 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Rajeev H. Dehejia
New York University (NYU) - Robert F. Wagner Graduate School of Public Service ( email )
The Puck Building
295 Lafayette Street, Second Floor
New York, NY 10012
United States

National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany

CESifo ( email )
Poschinger Str. 5
Munich, DE-81679
Germany

Dmitri Romanov
Government of the State of Israel - Israel Central Bureau of Statistics ( email )
Israel
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