Working Paper: NBER ID: w8845
Authors: Kevin Milligan
Abstract: Variation in tax policy presents an opportunity to estimate the responsiveness of fertility to prices. This paper exploits the introduction of a pro-natalist transfer policy in the Canadian province of Quebec that paid up to C$8,000 to families having a child. I implement a quasi-experimental strategy by forming treatment and control groups defined by time, jurisdiction, and family type. This permits a triple-difference estimator to be implemented -- both on the program's introduction and cancellation. Furthermore, the incentive was available broadly, rather than to a narrow subset of the population as studied in the literature on AFDC and fertility. This provides a unique opportunity to investigate heterogeneous responses. I find a strong effect of the policy on fertility, and some evidence of a heterogeneous response that may help reconcile these results with the AFDC literature.
Keywords: tax incentives; fertility; pronatalist policy; Quebec
JEL Codes: H3; J1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Introduction of the pronatalist transfer policy (J18) | Increase in fertility rates (J13) |
| Increase of $1000 in benefits (H53) | Increase in fertility rates (J13) |
| Higher-income families (I24) | Stronger reaction to incentives (E70) |
| Lower-income families (I24) | No statistically significant response (C29) |