Tag: Childcare

Five Years in Operation: the Polish Universal Child Benefit

Family in the golden hour representing Child Benefits

Over the last five years, Polish families with children have been entitled to a relatively generous benefit of approximately €110 per month and child. Initially granted for every second and subsequent child in the family regardless of income and for the first child for low-income families, the benefit was made fully universal in 2019. With the total costs amounting to as much as 1.7% of Poland’s GDP, the benefit reaches the parents of 6.7 million children and significantly affects these families’ position in the income distribution. Its introduction has led to a substantial reduction in the number of children living in poverty. However, since families with children are more likely to be among households in the upper half of the income distribution, out of the total cost of the benefit, a proportionally greater share ends up in the wallets of high-income families. While the implementation of the benefit has significantly changed the scope of public support to families in Poland, there are many lessons to be learnt and some important revisions to be undertaken to achieve an effective and comprehensive support system.

Introduction

One of the principal commitments in the 2015 Polish parliamentary elections of the then-main opposition party – Law and Justice (Prawo i Sprawiedliwość, PiS), was introducing a generous child benefit. The purpose of this benefit was to support families and encourage higher fertility, which had been one of the lowest in the European Union for a long time. Following PiS’s electoral victory, the new government introduced a semi-universal child benefit of approximately €110 per month (exactly 500 PLN per month, thus the Polish nickname of “the 500+ benefit”) in April 2016. Initially, the benefit was granted for every second and subsequent child in the family regardless of income and for the first child in low-income families. Since July 2019 (nota bene three months before the next parliamentary elections), it was made universal – all parents with children under the age of 18 are entitled to 500PLN per month for every child.  The benefit is relatively generous (for comparison, it accounts for 17.9% of the minimum wage in Poland in 2021), and universal coverage implies substantial costs for the government budget, totalling about 41bn PLN per year (1.7% of the Polish GDP).

Over the last five years, a number of analyses of the consequences of the benefit’s introduction have been conducted. These have encompassed a variety of socio-economic outcomes for Polish families with children – from a comprehensive assessment of these consequences (Magda et al. 2019) to analyses focused on specific effects of the benefit, such as the impact on women’s economic activity (Magda et al. 2018, Myck 2016, Myck and Trzciński 2019) or poverty (Brzeziński and Najsztub 2017, Szarfenberg 2017). The fifth anniversary of the benefit’s implementation seems to be a good opportunity for a summary and update of previous evaluations of the distributional consequences and financial gains for households resulting from this policy (an overview of all the previous CenEA analyses of the child benefit can be found in CenEA 2021). The results presented in this brief are based on analyses conducted using the Polish microsimulation model SIMPL on data from the 2019 CSO Household Budget Survey (more details in Myck et al. 2021). It should be noted that the analyses do not account for the impact of the Covid-19 pandemic on the material situation of households, as the data was collected before the outbreak. As previous studies suggest, the consequences for households of the pandemic and the series of resulting lockdowns varied greatly depending on various factors, such as the sources of income, sector, and form of employment, thus making it impossible to estimate precisely (Myck et al. 2020a).

The Child Benefit on Household Incomes

Due to its universal character, the distributional consequences of the child benefit payments are directly related to the position of households with children aged 0-17 in the income distribution relative to those without. As households with children are more likely to be in the upper half of the distribution (taking into account the demographic structure of households through income equivalisation), out of the total budget expenditure on the benefit, a proportionally greater share goes to high-income families (Table 1). Families with children in the two highest income decile groups (i.e., belonging to the 20% of households with the highest income) currently receive almost 25% of the total annual expenditure on the child benefit. On the other hand, among the 20% of households with the lowest incomes, families with children receive only 11.7% of the total annual cost of the benefit.

Table 1. Household gains resulting from the child benefit by income decile groups

Source: Myck et al. 2021. Notes: Income decile groups – ten groups each covering 10% of the population, from households (HH) with the lowest disposable income to the most affluent households, calculated on the basis of equivalised incomes.

Compared to the poorest 10% of households, families with children in the highest income decile receive 2.5 times more of the total funds allocated to the benefit.

It is also worth noting that the proportion of benefit in the disposable income is relatively evenly distributed if one considers all households in a given decile (with and without children). The proportional benefits in the first nine income deciles are in the range of 3.4% and 5.3% and only fall to 1.9% in the highest income group. A significant differentiation of the benefit in proportional terms can only be seen when accounting solely for households with children within each income decile. The benefit amounts to as much as 26.9% of the disposable income of households with children in the first decile, and the effect falls in subsequent groups – from 18.9% and 16.4% in the second and third deciles, to only 4.1% in the top decile.

The Child Benefit and the Position of Families With Children in the Income Distribution

Taking into account the magnitude of the policy, the position of families with children in the income distribution relative to other households may, to some extent, be the result of receiving the benefit itself. It is, therefore, reasonable to ask what role the benefit plays in shaping this relative position in the income distribution. Figure 1 presents the number of children under 18 in households by income decile groups when the benefit is included in total household income (left panel) and in a hypothetical scenario when the child benefit payment is withdrawn (right panel). As we can see, the withdrawal of the benefit would cause a substantial change in the relative position of families with children in the income distribution, significantly increasing the number of children in the lowest income groups. While in the current system, the poorest 10% of households include 342 thousand children aged 0-17, this number would be 553 thousand in a system without the benefit. However, the benefit also changes the relative position of high-income households with children. In the current system, the richest 10% of households include 762 thousand children. Subtracting the benefit from their household income would reduce this number to 687 thousand.

Figure 1. The child benefit and its impact on the position of families with children in the income distribution

Source: Myck et al. 2021.

Thus, even when taking into account the income distribution without the benefit, the number of children among the richest 10% of households is almost 25% higher than the number of children in the poorest 10% of households. Looking at the income distribution after including the benefit, there are more than twice as many children in the richest 10% of households than among the poorest 10%. This, in turn, inevitably means that, out of the total cost of the benefit, over twice as much money is transferred to households belonging to the richest deciles as compared to the funds transferred to families belonging to the poorest 10% of households.

Discussion

With the total costs amounting to 1.7% of Poland’s GDP, the child benefit introduced in April 2016 substantially raised the level of direct financial support for families with children. As shown in this brief, the benefit reaches the parents of 6.7 million children aged 0-17 and significantly affects the position of these families in the income distribution. While, on the one hand, a large proportion of families with children have incomes high enough to be in the highest income groups even without this support , the lowest decile group would include over 200 thousand more children in the absence of the benefit. This confirms that the child benefit alone contributes to a significant improvement in the material conditions of families with children and to a significant reduction in poverty (cf. Brzezinski and Najsztub, 2017; Szarfenberg, 2017). However, the scale of this reduction is modest given the size of the resources involved. This is not surprising given that the bulk of the total costs of the benefit comes from the 2019 program extension to cover all children regardless of family incomes, which largely ended up in the wallets of higher-income families (Myck et al. 2020b). One of the key goals of the benefit upon introduction was to increase the number of births in Poland by easing the material conditions of families with children. Yet despite a radical increase in the level of support, the number of births in Poland over the period 2017-2020 has essentially remained the same as that forecasted by the Central Statistical Office in its long-term population projection of 2014 (Myck et al. 2021). It is thus difficult to consider the benefit a success in terms of this major objective. Moreover, the withdrawal of the income threshold has largely eliminated the negative disincentive effects of the benefit with regard to employment (Myck and Trzcinski 2019). However, it is unclear whether the post-pandemic economic situation will allow for an increase in female labour force participation, which declined following the introduction of the benefit in 2016 (Magda et al., 2018).

The effects of every socio-economic programme should be assessed by comparing cost-equivalent alternatives. Despite all gains the “500+” child benefit has brought to millions of families in Poland over the last five years, the flagship programme of the ruling Law and Justice party does not fare well in this perspective. The need for change seems much broader than the reform of the benefit alone. The benefit was introduced on top of two other financial support mechanisms focused on families with children, namely family allowances and child tax credits, and the three elements have been operating in parallel since 2016. A number of suggestions on creating a streamlined, comprehensive system have been made a long time ago (e.g., Myck et al. 2016). However, a major restructuring of the entire support system with clearly defined socio-economic policy goals in mind seems all the more justified now, when many families may require additional assistance due to the difficult financial situation related to the Covid-19 pandemic.

Acknowledgement:

This Policy Brief draws on the CenEA Commentary published on 31.03.2021 (Myck et al. 2021). It has been prepared under the FROGEE project, with financial support from the Swedish International Development Cooperation Agency (Sida). The views presented in the Policy Brief reflect the opinions of the Authors and do not necessarily overlap with the position of the FREE Network or Sida.

References

  • Brzeziński, M., Najsztub, M. 2017. The impact of „Family 500+” programme on household incomes, poverty and inequality”, Polityka Społeczna44(1): 16-25.
  • CenEA 2021. Childcare benefit 500+ in CenEA analyses. https://cenea.org.pl/2021/04/06/childcare-benefit-500-in-cenea-analyses/
  • Magda, I., Brzeziński, M., Chłoń-Domińczak, A., Kotowska, I.E., Myck, M., Najsztub, M., Tyrowicz, J. 2019. „Rodzina 500+– ocena programu i propozycje zmian. (“Child benefit 500+: the evaluation of the programme and suggestions for changes”), IBS report.
  • Magda, I., Kiełczewska, A., Brandt, N. 2018. “The Effects of Large Universal Child Benefits on Female Labour Supply”, IZA Discussion Paper No. 11652.
  • Myck, M. 2016. “Estimating Labour Supply Response to the Introduction of the Family 500+ Programme”. CenEA Working Paper 1/2016.
  • Myck, M., Król, A., Oczkowska, M., Trzciński, K. 2021. “Świadczenie wychowawcze po pięciu latach: 500 plus ile?”(„The child benefit after 5 years – 500 plus what?”), CenEA Commentary 31/03/2021.
  • Myck, M., Kundera, M., Najsztub, M., Oczkowska, M. 2016. „25 miliardów złotych dla rodzin z dziećmi: projekt Rodzina 500+ i możliwości modyfikacji systemu wsparcia” („25 billion PLN to families with children: Family 500+ programme and possible modifications of the family support system”),  CenEA Commentary 18/01/2016.
  • Myck, M., Oczkowska, M., Trzciński, K. 2020a. “Household exposure to financial risks: the first wave of impact from COVID-19 on the economy”, CenEA Commentary 23/03/2020.
  • Myck, M., Oczkowska, M., Trzciński, K. 2020b. „Kwota wolna od podatku i świadczenie wychowawcze 500+ po pięciu latach od prezydenckich deklaracji” („Tax credit and child benefit 500+ after five years since electoral declarations”, in PL), CenEA Commentary 22/06/2020.
  • Myck, M., Trzciński, K. 2019. “From Partial to Full Universality: The Family 500+ Programme in Poland and its Labor Supply Implications”, ifo DICE Report 17(03), 36-44.
  • Szarfenberg, R. 2017. “Effect of Child Care Benefit (500+) on Poverty Based on Microsimulation”, Polityka Społeczna 44(1): 25-30.

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Gaming the System: Side Effects of Earnings-Dependent Benefits

20170130 Gaming the System FREE Policy Brief Image

Today policy makers in developing and middle-income countries face tremendous challenges in combating various forms of tax evasion. Increasingly it is proposed to tie social security benefits to the reported income and in this way increase tax compliance incentives. We use administrative data from Latvia to study generous childcare benefits, which depend on the reported wages in the pre-childbirth period. Our analysis reveals pronounced wage growth shortly before the childbirth, which we rationalize by the legalization of previously undeclared wages. Obtained results show that the wage growth is temporary and lasts only until the end of the period, which is taken into account when calculating parental benefits.

Today policy makers around the world are increasingly preoccupied with reducing various forms of tax evasion. To provide tax compliance incentives it is often proposed to tie social security benefits to declared wages. For example, Kumler et al. (2013) show that a reform tying future pension benefits to the payroll tax in Mexico increased tax payments after the reform. Similarly, Cruces and Bergolo (2013) and Bergolo and Cruces (2014) demonstrate that a reform tying health care insurance of children to the reported earnings of parents increased “legal” labor supply in Uruguay.

On the other hand, Kreiner et al. (2016) document inter-temporal wage shifting in Denmark to enjoy significantly lower marginal tax rates. In light of the results by Kreiner et al. (2016), it is possible that employees and employers collude to increase the wage during the period, which is taken into account when calculating social security benefits. If the wage increase is temporary then the result of tying social security benefits to wages might be a net loss to the government finances. Hence, the question of whether tying social security benefits to reported wages is a solution to the problem of payroll tax evasion is still open.

We demonstrate that tying social security benefits to the declared wages can backfire to the extent that it can lead to the excessive payments of social security benefits, while doing almost nothing to reduce payroll tax evasion, in this way producing net fiscal loss to government finances. More specifically, we show that if the contribution period that determines the size of the benefit is relatively short and social security benefits are generous, then by colluding, employees and employers can temporally increase the legal wage to extract generous benefits afterwards. This result can have implications for the design of social benefit systems in many countries, where relatively short contribution periods ensure generous long-lived benefits afterwards.

Institutional background and methodology

We illustrate this phenomenon by studying the childcare benefit in Latvia, which in 2005-2008 depended on parents’ declared wage in the pre-childbirth period. This system, introduced in 2005, replaced a universal (very modest in size) childcare benefit. The new rules foresaw that one of the parents could receive a benefit that was equivalent to the parent’s previous net wage until the child became one year old. The average wage that determined the size of the benefit was calculated over the 12-months period that ended three months before the childbirth (hereinafter – benefit qualification period) and therefore included 5 months of pregnancy. Initially the benefit was not compatible with employment but as of March 2007 it became possible to simultaneously work full-time and receive the benefit.

Presumably, the 2005 reform created incentives to report higher earnings before the childbirth, because of the generosity of the new benefit and because the benefit qualification period included pregnancy, i.e., the period when the mother knows if/when she will be eligible for the benefit. To uncover the effects of the incentives to report more income, we use administrative data on declared monthly wages and use three sources of identifying variation in a difference in differences setup.

First, we compare wage growth during pregnancy with wage growth of women who did not become pregnant. The identifying assumption is that, in the absence of pregnancy, the wages of women who became pregnant would follow the same trend as the wages of other women. Under this assumption, any difference in the wage growth can be interpreted as a legalization of previously undeclared wages. However, this assumption may not hold because pregnancy is not randomly assigned across women: women can anticipate a wage increase (e.g. anticipate a promotion) and adjust the decision to have a child. Therefore, we use a second source of identifying variation by comparing wage growth during pregnancy for women employed in the private sector with wage growth for women employed in the public sector, where tax evasion is presumably absent. Assuming that promotion anticipation effects in the private and the public sector are identical, this difference in wage growth can be interpreted as the growth of wages resulting from wage legalization.

Our previous assumption might be violated if promotions in the public sector can be easier to predict (which means that anticipation effects in the private and the public sectors are not necessarily identical). To address this challenge, we use a third source of identifying variation coming from the 2005 reform, which tied the childcare benefit to the previous earnings. Since this reform increased incentives to disclose higher earnings during pregnancy, the difference in wage growth in the private sector versus public sector should not be observed before the reform.

Estimations are based on a matched employee – employer administrative dataset, which covers monthly-declared earnings of all employed workers in Latvia from 1996 to 2010.

Results

There are three main findings. First, wage growth during the first five months of the pregnancy in the private sector is always higher than that in the public sector. If we use this observation to obtain an estimate of the wage growth due to the legalization of previously undeclared wages, we find, depending on the regression specification, that it varies between 5 and 7 percent.

Second, this effect is mainly driven by the time period after the reform of 2005 (see Figure 1). Thus, if we use the time period before the reform of 2005 only to difference out permanent differences in the anticipation effects between public and private sector, our preferred regression specifications provide us with an estimate that varies from 5 to 6 percent.

Figure 1. Difference-in-difference-in-difference estimate by year, %

Note: difference in difference in differences estimate for a given year is calculated by first comparing wages of pregnant women with those of not pregnant before and during first five months of the pregnancy. Then this estimate is compared between public and private sectors. Everything is compared with respect to one year before the reform announcement – 2003.

The final finding shows that the sharp jump in the wage growth in private sector versus the public sector starts to appear exactly in the first month of the pregnancy (see Figure 2). It is important to note that we do not see any differential wage growth between the public and the private sector before the date of conception, indicating that potential anticipation effects are limited.

Figure 2. Difference-in-difference-in-difference-in-differences estimate by pregnancy month, %

Note: difference in difference in difference in differences estimate for a given month is calculated by first comparing wages of pregnant women with those of not pregnant in a given month with respect to one month before the date of conception. Then this estimate is compared between public and private sectors and finally previously calculated difference is contrasted before and after the reform tying parental benefits to reported wages.

Due to the fact that many women do not return to the same employer after childbirth, it is problematic to make inferences about the wage a woman receives once she returns to the labor market. To overcome this challenge we use the same social security data for men for the time period covering January 2007 until August 2010.

As explained previously, starting in March 2007 the childcare benefit became compatible with full time employment. The outcome of this reform was that many men started to receive the benefit, while continuing to work. This allows us to perform the previous analysis for the sample of men.

Results presented in the Figure 3 show that similarly as in the sample of women we see a sharp increase in the wage during the qualification period. Additionally, we see a slowdown in the wage growth once the qualification period ends. It is important to mention that displayed coefficients describe the difference between public and private sector in the change in wages between men whose partners became pregnant and those who did not with respect to the reference period (here one month before the conception date). We also record a sharp growth in wages in the public sector in the months following the childbirth. On the contrary, wages in the private sector stay the same, hence the large difference in the months following the childbirth.

Figure 3. Difference-in-difference-in-differences estimate for men by month of partner’s pregnancy, %

Note: difference in difference in differences estimate for a given month is calculated by first comparing wages of men whose partner became pregnant with those men whose partner did not become pregnant with respect to one month before the date of conception. Then this estimate is compared between public and private sectors

Conclusion

Drawing on the example of the childcare benefit in Latvia, we show that declared wages sharply increase during the period that is taken into account when calculating social security benefits. This wage growth is temporary and does not continue once the benefit qualification period is over. We interpret this phenomenon as the legalization of previously undeclared wages: this temporary legalization of earnings is possible, because the benefit qualification period is relatively short (12 months), and includes 5 months of pregnancy, which makes the average wage during the qualification period relatively easy to affect. Such setting creates bad incentives – an employee and an employer can collude to increase the average wage that determines the size of the benefit.

Additionally, our research casts doubts on policies tying parental benefits to declared earnings with an aim to reduce opportunity costs of high earners and increase their fertility. Researchers analyzing such policies should be very cautious when interpreting their results because the effect that they capture might not come from high earning women, but rather from women who manage to increase their income during pregnancy. Absent monthly data, it might be challenging to disentangle the two.

Many countries implement earnings-dependent benefits. Our results show that even very well designed social security benefits can and will be abused if people are given wrong incentives. Thus to achieve the best outcomes policy makers when deciding whether to tie social security benefits to declared earnings should take into account side effects described in this brief.

References

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Highly Educated Women No Longer Have Fewer Kids

This policy brief summarizes evidence that the cross-sectional relationship between fertility and women’s education in the U.S. has recently become U-shaped. The number of hours women work has concurrently increased with their education. The theory that the authors advance is that raising children and home-making require parents’ time, which could be substituted by services such as childcare and housekeeping. By substituting their own time for market services to raise children and run their households, highly educated women are able to have more children and work longer hours. The authors find that the change in the relative cost of childcare accounts for the emergence of this new pattern.

In 2012, the European Commission published a special report on “women in decision making positions”, suggesting legislation to achieve balanced representation of women and men on company boards. Some countries such as Norway, France, Italy, Belgium and the Netherlands have already taken legal measures in that direction. Trends in women’s education give hope that such goals may be achieved as women are increasingly occupying more prestigious and demanding careers. Indeed, in today’s world, women have surpassed men in higher education in most developed countries (Goldin et al 2006; Hazan and Zoabi 2015a).

What are the consequences of this important development for fertility? Historically, highly educated women have had fewer kids than less educated women (see, for example, Jones and Tertilt 2008). This relationship is deep rooted in the economic and sociological literature to the extent that many theories have already been proposed to explain this relationship. Leading explanations rely on the difficulty to combine children and career (Mincer, 1963; Galor and Weil, 1996) and the quantity-quality tradeoff (Becker and Lewis, 1973; Galor and Weil, 2000; Hazan and Zoabi 2006). The shift in women’s education coupled with more demanding careers for women means that if the cross-sectional relationship between women’s education and fertility is stable over time, then future fertility rates will continue to decline from their already historically low levels.

In Hazan and Zoabi (2015b) we find, however, that the cross-sectional relationship between women’s education and fertility has changed from monotonically declining until the 1990s to a U-shaped pattern during the 2000s. This change is due to a substantial increase in fertility among women with advanced degrees who increased their fertility by 0.7 children, or by more than 50%. This is illustrated in Figure 1, which plots the cross-sectional relationship between fertility and women’s education in 1980 and during the period 2001-2011.

Figure 1: Fertility Rates by Women’s Education, 1980 and the 2000s.

Figure1

What can explain the rise of fertility among highly educated women during the period that saw the largest increase in the labor supply of highly educated women? We argue that the rise in college premium increased the demand for child-care and housekeeping services by highly educated women and a rise in the supply for such services by low educated women. This ‘marketization’ weakened the tradeoff between career and family life and enabled highly educated women to pursue demanding career without giving up on their desired family size.

To establish the relationship between the rise in the college premium and fertility of highly educated women, we use data from the March CPS for the period 1983-2012. We estimate the average hourly wage in the “child day-care services” industry and allow it to vary by state and year. In addition, we compute the hourly wage of all women in the 25-50 year-old age group who reported a positive salary income. Figure 2 presents the fitted values of the average of this variable for each of our five educational groups. The figure shows that childcare has become relatively more expensive for women with less than a college degree but relatively cheaper for women with a college or an advanced degree.

Figure 2: Linear Prediction of the Log of the Ratio of Average Wage in the Childcare Industry to Average Wage in the Five Educational Groups 1983–2012

HazanZoabi_Figure2

To utilize the micro data we estimate regression models where the dependent variable is a binary variable that takes the value of one if a woman, living in a specific state in a specific year gave birth during that year and zero otherwise. Our main explanatory variable is the labor cost in the child daycare industry divided by the own wage of that woman. We show that there is a highly statistically significant and economically large negative correlation between this measure of childcare cost and the probability of giving a birth. In our empirical analysis we find that this change in the relative cost can account for about one-third of the increase in the fertility of highly educated women. We use a battery of tests to show that this correlation is not driven by selection of women into the labor market, by the endogeneity of wages, or by specific years over the last three decades.

Figure 3: 2000s Actual and Hypothetical Fertility under the 1980s prices of Childcare

Figure4

Figure 3 uses the estimates from the regression models described above and shows a hypothetical fertility for 2001-2011 under the 1983-1985 relative childcare cost. The figure shows that the hypothetical fertility curve is obtained by a clockwise rotation of the actual fertility curve around the group of women that has some college education.

Direct evidence on paid childcare services is consistent with this view. Figure 4 shows the average weekly paid childcare hours by all women aged 25-50 in 1990 and 2008. The figure has two salient features. First, in each of these years, paid childcare is increasing with women’s education. Secondly, between 1990 and 2008, paid childcare hours have stagnated for women with up to some college education but have sharply increased for highly educated women.

Figure 4: Paid Childcare Weekly Hours for Women aged 25-50.

Figure4

We then rule out potentially other explanations. What if the increase in labor supply stems from women who did not give birth during that year? To address this concern we shows that the cross-sectional relationship between education and usual hours worked for the sub-sample of women age 15-50 who gave birth during the reference period exhibit the same positive correlation. Another concern might be that it is in fact the spouses who respond to a birth by lowering their labor supply enabling their wives to work more. Find that men who are married to highly educated women work more than men who are married to women with lower levels of education. Interestingly, fathers to newborns work more than husbands who do not have a newborn at home, regardless of the education of their wives. More importantly, usual hours worked by fathers to newborns monotonically increased with their wives’ education. Thus, the spouses of highly educated women are not the ones substituting in childcare for their working wives.

Another concern our model may raise is that marriage rates differ across different educational groups. If married women have higher fertility rates and if more educated women have higher marriage rates, more educated women’s higher fertility rates may not be caused by the availability of relatively cheaper childcare and housekeeping services, but rather simply by their higher marriage rates. We find that the fraction of women with advanced degrees who are currently married is somewhat lower than that of women with college degree.

Figure 5: Number of birth per 1,000 White Women in the US in Age Groups 35-39, 40-44 and 45-49: Women with Advanced Degrees (2001-2011) and Historical Rates.

Figure5

A final potential explanation might be related to recent advancements in Assisted Reproductive Technology (ART) that enable women to combine long years in school without scarifying parenthood. We address this possibility in three ways. First, we show that historical levels of fertility rates among women above age 35 were higher than the levels during the 2000s (see Figure 5). This stands in contrast to the argument that highly educated women were not able to have higher fertility rates in the past due to medical reasons. Secondly, we note that ART accounts for less than 1% of births occurred during the 2000s. Finally, fifteen U.S. states have infertility insurance laws that provide coverage to infertile individuals. We compare fertility patterns by women’s education in these states to the rest of the country and find no difference in fertility rates during the 2000s between the two groups of states.

The results of this study have several implications. For public policy, it highlights potential benefits from pro-immigration policies. Unskilled immigrants can potentially have positive effect on fertility via an increase in the supply of cheap home production substitutes. For many developed countries that are facing aging and shrinking population this may be something to consider. It also has consequences for economic growth. Given the strong correlation between parents’ education and kids’ education, an increase in the relative representation of kids coming from highly educated families means that the next generation is going to be relatively more educated. These are good news for economic growth.

References

  • Gary S. Becker and Gregg H. Lewis. On the interaction between the quantity and quality of children. Journal of Political Economy, 81:S279–S288, 1973.
  • Oded Galor and David N. Weil. The gender gap, fertility, and growth. American Economic Review 86(3): 374–387, 1996.
  • Oded Galor and David N. Weil. Population, technology, and growth: From Malthusian stagnation to the demographic transition and beyond. American Economic Review 90(4): 806–828, 2000.
  • Claudia Goldin, Lawrence Katz, and Ilyana Kuziemko. The homecoming of American college women: A reversal of the college gender gap. Journal of Economic Perspectives 20(4): 133–156, 2006.
  • Moshe Hazan and Hosny Zoabi. Does longevity cause growth? A theoretical critique. Journal of Economic Growth, 11 (4), 363-376, 2006.
  • Moshe Hazan and Hosny Zoabi. Sons or Daughters? Endogenous Sex Preferences and the Reversal of the Gender Educational Gap. Journal of Demographic Economic, Vol 81, pp: 179-201, 2015a.
  • Moshe Hazan and Hosny Zoabi. Do highly educated women choose smaller families? Economic Journal, 125(587):1191–1226, 2015b.
  • Larry E. Jones and Michele Tertilt. An economic history of fertility in the u.s.: 1826-1960. In Peter Rupert, editor, Frontiers of Family Economics, pages 165 – 230. Emerald, 2008.
  • Jacob Mincer. Market prices, opportunity costs, and income effects. In Carl F. Christ, editor, Measurement in economics: Studies in mathematical economics and econometrics in memory of Yehuda Grunfeld. Stanford University Press, pages 67-82, 1963.