, Volume 2, Issue 3, pp 237-254

The Effect of Child Benefit Policies on Fertility and Female Labor Force Participation in Canada

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Abstract.

This paper presents an analysis of the effects of Canadian child benefit policies on fertility and female labor supply. Canada has adopted a variety of child benefit policies since 1918 that are incorporated into an economic model of fertility. This model is estimated and tested with time series data on fertility, female labor force participation, female wages, male incomes, female education, and child benefits. Cointegration methods are employed to accommodate problems of nonstationarity and endogeneity that characterize time series models of fertility and female labor supply. Two cointegrating relations are found, and these are identified as a fertility relation and a female labor supply function. All economic variables, including child benefits, have statistically significant and appropriately signed coefficients. The estimates are used to evaluate the effects of policy and other economic changes on fertility.

This research was funded by grant # SES-9910662 from the National Science Foundation. The authors appreciate the comments of three anonymous referees and those of James Alm, Editor of this special issue.