Does Fertility Respond to Financial Incentives?

49 Pages Posted: 15 Jul 2008

See all articles by Guy Laroque

Guy Laroque

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Bernard Salanie

Columbia University - Graduate School of Arts and Sciences - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: June 2008

Abstract

There has been little empirical work evaluating the sensitivity of fertility to financial incentives at the household level. We put forward an identification strategy that relies on the fact that variation of wages induces variation in benefits and tax credits among "comparable" households. We implement this approach by estimating a discrete choice model of female participation and fertility, using individual data from the French Labor Force Survey and a fairly detailed representation of the French tax-benefit system. Our results suggest that financial incentives play a notable role in determining fertility decisions in France, both for the first and for the third child. As an example, an unconditional child benefit with a direct cost of 0.3% of GDP might raise total fertility by about 0.3 point.

Keywords: population, fertility, incentives, benefits

JEL Classification: J13, J22, H53

Suggested Citation

Laroque, Guy and Salanie, Bernard, Does Fertility Respond to Financial Incentives? (June 2008). CESifo Working Paper Series No. 2339. Available at SSRN: https://ssrn.com/abstract=1157260

Guy Laroque

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
92245 Malakoff Cedex
France
+33 1 4117 7718 (Phone)
+33 1 4117 7666 (Fax)

Bernard Salanie (Contact Author)

Columbia University - Graduate School of Arts and Sciences - Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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