Targeting Fertility and Female Participation Through the Income Tax

37 Pages Posted: 12 Nov 2008

See all articles by Ghazala Azmat

Ghazala Azmat

Sciences Po

Libertad Gonzalez

Universitat Pompeu Fabra; Barcelona Graduate School of Economics (Barcelona GSE); IZA Institute of Labor Economics

Date Written: October 12, 2008

Abstract

Low female labor force participation and low fertility rates in OECD countries, especially in Southern European countries, have raised a great deal of concern in recent years. As a means to reconcile work and family, Spain (one of the countries with the lowest female participation and lowest fertility) tried to target both issues through an income tax reform in 2003. One component of the tax reform consisted of a tax credit for working mothers of young children and the other consisted of sizeable increases in households' tax deductions per child. We find that the reforms increased both fertility and participation, and that these effects were very heterogeneous across different groups of women. Fertility is estimated to have increased by between 5 and 6 births per 1,000 women (where the average fertility is 37 per 1,000), while the participation rate of mothers with children under the age of 3 years increased by about 1.6 percentage points (where the average participation is 52 percent). Both effects were stronger among lower-educated women. Moreover, we find that the simultaneous nature of the policy reform dampened down the participation effect, such that some "trade-off" in the policy objectives existed.

Keywords: Female labor force participation, fertility, family policies

JEL Classification: J22, J13, H31

Suggested Citation

Azmat, Ghazala and Gonzalez, Libertad, Targeting Fertility and Female Participation Through the Income Tax (October 12, 2008). Available at SSRN: https://ssrn.com/abstract=1300339 or http://dx.doi.org/10.2139/ssrn.1300339

Ghazala Azmat (Contact Author)

Sciences Po ( email )

27 rue Saint-Guillaume
Paris Cedex 07, 75337
France

Libertad Gonzalez

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

Barcelona Graduate School of Economics (Barcelona GSE)

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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