The Effect of Income Maintenance Laws on Fertility in the United States

on the effects of income maintenance laws on fertility. The appendices to this paper are printed separately as Institute for Research on Poverty Discussion Paper 118-72 and are available to those interested in the detailed tabulations and calculations underlying the summary tables in the paper. ABSTRACT The potential effects of income maintenance laws on fertility are examined in terms of an economic model, and some rough estimates are offered of the quantitative magnitudes of these effects. The type of income maintenance law examined is a version of a negative income tax, like the Family Assistance Plan, and the first part of the paper discusses the ways in which such a program might influence the incentives to have additional children. On the basis of a priori reasoning, scattered empirical evidence, and the author's judgment, the paper develops several arguments for a presumed pronatal effect of such programs. First, the increases in income for families receiving benefits will enable them to afford more children. Second, the direct cash assistance which is forthcoming for each additional child lowers directly the costs of raising the child. Third, the disincentives to work because of the decline in transfer payments as earnings increase-effectively a tax on earnings or a cut in wages-may encourage the wife to stay out of the labor force and substitute the production of home goods for market goods; when she does this, the result may be more births. Finally, some discussion is made of the potential pronatal effects of various income in-kind subsidies, like day care subsidies. The final part of the paper attempts to quantify the effect of these changes in incentives on fertility. The data and models used are imperfect, however, and this exercise may be more valuable as an exposition of methodology than as a statement of a set of accurate estimates.