1. Centre for Market and Public Organisation
Understanding the effect of public policy on fertility
Mike Brewer (Institute for Fiscal Studies)
Anita Ratcliffe (CMPO, University of Bristol)
Sarah Smith (CMPO and IFS)

2. The project
Falling total fertility rates sparking interest in pro-natalist policies (France, Italy, Japan, Germany)
Phase 1: Understanding trends in fertility in the UK
What have been the main changes in fertility behaviour?
(How) Do these trends vary by education?
Phase 2: The impact of welfare reform on fertility
New Labour substantially increased financial help for families (working families tax credit, child tax credit)
Does fertility respond to financial incentives?

3. Main Findings Phase 1 Phase 2 Distinctive cohort trends in fertility
fall in higher-order births
rise in childlessness & one-child families
fertility patterns relatively stable
? further postponement of fertility
Biggest falls in fertility are among educated women (19+)
Phase 2
Preliminary results suggest a small, significant effect of WFTC on fertility

4. Phase 1: Cohort trends in fertility
Pooled cross-section data
Family Expenditure Survey 1968 – 2003
Family Resources Survey 1990 – 2004
Own-child method
Use age of mother and children to infer age of birth; birth order
Construct (age-specific) parity progression ratios by cohort

5. Constructing fertility histories
1955 cohort: What proportion have a first birth at age 25?
Combine “current” information: those aged 25 who have
one child aged 0 in 1980 survey…
… and “retrospective” information:
1981 survey – those aged 26 whose oldest child is aged 1
1982 survey – those aged 27 whose oldest child is aged 2
and so on…
Use survival analysis to estimate proportion of each cohort who have
a birth of order n by age x
Current and retrospective information is assumed to be equally valid;
regression analysis shows no systematic effect of
distance of survey year on estimated probability of birth

6. Potential measurement error/ selection problems
Infant mortality
Household re-formation
Rely on the fact that most children remain with mother
Children leaving home
Only looking at births 15 – 37
Advantages
Long time-series (cohorts born 1935 – 1975)
Large sample sizes, allow us to look at individual date of birth cohorts
Information on birth order
Demographic information – region, education, employment

7. Annual total fertility rate = number of children a woman would have
if she had the age-specific birth rates in that year

8. Completed family size, by cohort
Average family size falls – but by less than TFR
Phase 1 (1935 – 1950) – decline in higher order births
Phase 2 (1945 – 1955) – decline in first and second births
Phase 3 (1955 – 1962) – period of stability
Phase 4 ??

9. Proportion giving birth before age 30
Delay in family formation beginning with 1945 cohort

10. Completed family size, by cohort and region
Northern Ireland experienced biggest fall in completed family size
Of the three other regions:
Wales has highest completed family size
Scotland experienced a greater fall than England and Wales

11. Completed family size, by cohort and education
Decline in fertility cannot be explained just in terms of greater
participation in higher education (19+).
High education group have experienced a greater (absolute and relative)
decline in fertility

12. Completed family size, by cohort and education
Greater rise in childlessness among high education group,
particularly cohorts born 1950 – 55

13. Proportion giving birth before age 30
Greater delay in child-bearing among higher educated women

14. A tale of four “cohorts”
Women born 1935 – 45: Family then part-time work
Average age at first birth fell, deliberate choice to limit family size to two (pill)
Little increase in full-time employment, but more women with kids working part-time
Women born 1945 – 55: Career then family
Average age at first birth rose, increase in childlessness & one-child families
Increase in full-time work (particularly educated women), but not among women with children
Women born 1955 – 65: Career and family (for some)
Average age at first birth continued to rise, but rates of childbearing fairly constant
Rise in proportion of women with children who work full-time, particularly educated women
Women born 1965 onwards
Huge increase in proportion of women going on to higher education
Average age at first birth rising faster, implications for proportion remaining childless, one-child families?

15. Phase 2: The effect of WFTC on fertility
Working Families Tax Credit introduced in 1999
Higher benefits for (low-income) families with children
In theory, should raise fertility
Evaluation strategy: Difference-in-differences
Compare fertility “before” and “after” the reform for couples affected by WFTC reform: the “treatment” group = low education
Contrast with change over the same time period for couples not affected by the reform: the “control” group = high education
Data
FES/FRS – on an annual rather than a cohort basis
BHPS – look at employment/fertility transitions

16. Phase 2: The effect of WFTC on fertility
Sample issues
Women aged 20 – 37 who were in a couple at the time of interview
Lone parents
Reform has positive employment effects, which may reduce fertility
Fertility complicated by partnership formation issues
Before = April 1985 – March 1999; After = April 2000 – March 2002
Low education, treatment group defined as both partners left school at the compulsory school leaving age

17. Phase 2: The effect of WFTC on fertility
Big increase in median weekly payments to couples with children (2006 prices), bigger for first children
Magnitude of increase correlated with education
One child
Two children
Three children
1998/9
£13.87
£25.14
£36.41
2002/03
£28.97
£40.77
£52.41

18. Phase 2: The effect of WFTC on fertility

19. Phase 2: The effect of WFTC on fertility
Regression analysis
Controlling for age of mother, education, presence and age of kids, region
Allowing for common trend, differential trend & common change in trend
Results
The probability of a birth increases by 0.75 percentage points among the treatment group following the introduction of WFTC (statistically significant at the 10% level)
The effect is greater for first births. The probability of a first birth increases by 1.77 points (statistically significant at the 5% level). There is no significant effect for women who already have children
There is no difference in effect by the age of the mother
NB we cannot distinguish tempo from quantity effects

20. Further work Project finishes Dec 2006
Robustness checks on regression analysis
Define treatment and control in terms of income
Experiment with spurious reforms
Use panel data (BHPS) to examine employment/fertility transitions
Finish writing up
Disseminate!