Centre for Market and Public Organisation

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

Constructing fertility histories 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 1 1982 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

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

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

Centre for Market and Public Organisation