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?

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 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) Data – British Household Panel Survey, Family Expenditure Survey

Phase 1: Understanding trends in fertility Family Expenditure Survey /03 –Use age of mother and children to infer age of birth; birth order –Construct (age-specific) parity progression ratios by cohort and period 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?

1955 cohort: What proportion have a first birth at age 25? Combine “current” estimate: those aged 25 who have one child aged 0 in 1980 survey… … and “backwards” estimates: 1981 survey – those aged 26 whose oldest child is aged survey – those aged 27 whose oldest child is aged 2 and 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 of distance of survey year on estimated probability of birth Constructing fertility histories

Potential measurement error/ selection problems Mother’s and children’s ages measured imprecisely Infant mortality Household re-formation –Rely on the fact that most children remain with mother Children leaving home –Choose age threshold of 38 Advantages (compared to eg retrospective fertility histories) –Long time-series (cohorts born 1935 – 1980) –Large sample sizes

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

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

Differences by education (High education = 18+) Bigger shift to later childbearing/ childlessness among educated women

Bigger fall in average family size among educated women

Next steps Phase 1 –Factors that might explain fertility trends (employment, contraception) –Differences by race, region –Look at period fertility Phase 2 –Examining effects of WFTC using FES and BHPS