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)

Background

• Falling total fertility rates sparking interest in pro-natalist policies (France, Italy, Japan, Germany)

• UK: TFR fell from 2.93 (1964) to 1.63 (2001)

– No explicit pro-natalist stance

– “This is not ‘breed our way’ to economic success”

• But, recent reforms (WFTC, CTC) increased financial help for families

• Does (changing) financial support for families affect fertility?

Total fertility rate in the UK

Source: ONS

Phase 2: The effect of WFTC on fertility

• Working Families’ Tax Credit introduced in 1999– More generous credits for families with at least one partner in work– More financial support with childcare if single parent/ both partners work– Accompanied by more general increase in child-related cash transfers

• Evaluation strategy: Difference-in-differences– Compare fertility “before” and “after” the reform for couples affected by

WFTC reform (the “treatment” group)– Contrast with change over the same time period for couples not affected

by the reform (the “control” group)– Use education level of adults as proxy for “affected by reforms”

• Data – British Household Panel Survey, Family Expenditure Survey

Phase 1: Understanding trends in fertility

• Key questions:

– What have been the main changes in fertility behaviour?

– (How) do these trends vary by education?

– What factors appear to underlie the change in fertility?

• Family Expenditure Survey (1968-2003/4) & Family Resources Survey (1995/6-2004/5)

– Use age of mother and children to infer age of birth; birth order

– Construct (age-specific) parity progression ratios by cohort and period

1955 cohort: What proportion have a first birth at age 25?

Combine “current” estimate: those aged 25 who haveone child aged 0 in 1980 survey…

… and “backwards” estimates:1981 survey – those aged 26 whose oldest child is aged 11982 survey – those aged 27 whose oldest child is aged 2and so on…

Do the same for births at each age, and for different birth orders

Current and backwards estimates are assumed to be equally valid;preliminary regression analysis shows no systematic effect ofdistance of survey year on estimated probability of birth

Survey year Age of cohort1970 151971 161972 171973 181974 191975 201976 211977 221978 231979 241980 251981 261982 271983 281984 291985 301986 311987 321988 331989 341990 351991 361992 371993 38

Constructing fertility histories

Potential measurement error/ selection problems

• Mother’s and children’s ages measured imprecisely– know interview date, age in completed years, DOB only sometimes

• Infant mortality

• Household re-formation– Rely on the fact that most children remain with natural mother

• Children leaving home– Higher order births are wrongly classified as first births

– Solution: ignore births after certain age • Trade off: selection on older fertility versus selection on younger fertility

• Choose age threshold of 38 . Misses c. 3% births (increasing over time)

• Advantages (compared to eg retrospective fertility histories)– Long time-series (cohorts born 1935 – 1980)

– Large sample sizes

Summary Statistics

Cohort Sample Size Ages observed % with higher ed

1935 621 33-37 **

1945 2176 23-37 9%

1955 2777 16-37 16%

1965 6972 16-37 20%

1975 4332 16-33 38%

1980 3810 16-28 38%

• Age of first birth falls (1935–1945) then rises (1945+)• Rise in teenage pregnancy• Increasing proportion of cohort remain childless (1945+)

• Reduction in proportion giving birth before 30•Increasingly women are giving birth after 30 years

• Average family size falls – but by less than TFR • Phase 1 (1935 – 1950) – fall in third and subsequent births• Phase 2 (1945+) – rise in childlessness; one child families

Fertility has declined as women have increase participation in HE

• But there are important differences within education group:• Bigger shift to later childbearing/ childlessness among educated women

• Bigger fall in average family size among educated women

Next steps

• Phase 1

– Differences by region

Next steps

• Phase 1

– Factors that might explain fertility trends (employment, contraception)

• Phase 2

– Examining effects of WFTC using FES and BHPS