Fertility Response to the Tax Treatment of Children

Gopi Shah Goda, Harvard University
Kevin J. Mumford, Purdue University

One of the most commonly cited studies on the effect of child subsidies on fertility, Whittington, Alm and Peters (1990), claimed a large positive effect of child tax benefits on fertility using time series methods. We revisit this question in light of recent increases in child tax benefits by replicating this earlier study and extending the analysis with an additional 20 years of data. We find that their results suffer from the spurious regression problem, and are not robust to differencing. We find evidence of a statistically significant fertility response to a change in the real value of child tax subsidies occurring with a one- to two-year lag, but a much smaller and statistically insignificant total effect after several years, suggesting that a change in the child tax subsidy most strongly affects the timing of births.

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Presented in Session 127: Social Demographic Aspects of Fertility in the Western World