The earned income tax credit and fertility

Abstract

Government programs designed to provide income safety nets or to encourage work often restrict eligibility to families with children, in an attempt to keep the programs well targeted. One potentially unintended consequence of the design of these programs is that if they lower the costs associated with having children, economic theory suggests that they may encourage childbearing. This paper considers whether dramatically changing incentives in the Earned Income Tax Credit (EITC) affect fertility rates in the United States. We use birth certificate data spanning the period 1990 to 1999 to test whether expansions in the credit influenced birthrate among targeted families. While economic theory would predict that a positive fertility effect of the program for many eligible women, our baseline models show that expanding the credit produced only extremely small reductions in higher-order fertility among white women. We also find evidence that suggests changes in marriage patterns may be related to changing fertility rates. For example, higher levels of the EITC are associated with higher first birth rates among married women and lower first births among unmarried women. This may suggest that the EITC encouraged marriage among single women. ‡ Thanks to Gabrielle Chapman, Cristian Meghea and Karoline Mortenson for excellent research assistance. We are also grateful to

Income, the Earned Income Tax Credit, and Infant Health

“…Any increase in fertility for this relatively disadvantaged group would be expected to lead to a negative compositional effect and subsequent downward bias on the estimates. The available evidence suggests that the EITC does not impact fertility (Baughman and Dickert-Conlin 2009) Overall, given the balance of evidence and predictions, we expect that the EITC may improve infant health. The same forces that improve infant health, however, could also lead to a change in the composition of births.…”

Income, the Earned Income Tax Credit, and Infant Health

“…Any increase in fertility for this relatively disadvantaged group would be expected to lead to a negative compositional effect and subsequent downward bias on the estimates. The available evidence suggests that the EITC does not impact fertility (Baughman and Dickert-Conlin, 2009) or family formation (Dickert-Conlin 2002;Ellwood, 2000, Herbst 2011 Overall, given the balance of evidence and predictions, we expect that the EITC may improve infant health. The same forces that improve infant health, however, could also lead to a change in the composition of births.…”

Fertility Response to Financial Incentives: Evidence from the Working Families Tax Credit in the UK

“…Compared to FC, the amount of maximum credit increased. 2 Moreover, the threshold for the entitlement of maximum credit was raised from £79 to £90. Additionally, the rate at which the tax credit was deducted when weekly income exceeded the threshold was reduced from 70 to 55 percent.…”