The Effect of Tax-Transfer Policies on Fertility in Canada, 1921-88

Abstract

This paper estimates the effect on fertility of the personal tax exemption for children, child tax credit, family allowances, and maternity leave benefits in Canada using time-series data from 1921 to 1988. It is found that the exemption, child tax credit, and family allowances all have significant and positive effects on fertility; the results are robust to a variety of specifications including first-differencing. While the three tax-transfer programs seem to be very distinct, the null hypothesis that they have no differential effects on fertility can hardly be rejected. All the results also hold for the cumulative effect of the three tax-transfer programs. The estimates predict that a large increase in the value of the tax-transfer programs would be needed to increase fertility to the replacement level.