Subsidizing the Stork: New Evidence on Tax Incentives and Fertility

This paper exploits the introduction of a pro-natalist transfer policy in the Canadian province of Quebec that paid up to C$8,000 to families having a child. I implement a quasi-experimental strategy by forming treatment and control groups defined by time, jurisdiction, and family type. The incentive was available broadly, rather than to a narrow population as studied in previous work, providing an exceptional opportunity to investigate heterogeneous responses. I find a strong effect of the policy on fertility, and some evidence of a heterogeneous response that may help reconcile these results with previous estimates. JEL classification J13, H31 ∗This research was financially supported in part by the Social Science and Humanities Research Council and by the Canadian International Labour Network. I thank Michael Baker, Dwayne Benjamin, Jonathan Gruber, Thomas Lemieux, Robert McMillan, Jack Mintz, Aloysius Siow, Michael Smart, and seminar participants at many institutions for comments that have greatly improved the paper. †Department of Economics, University of British Columbia, #997–1873 East Mall, Vancouver, BC, Canada, V6T 1Z1. E-mail:[email protected]