Economic incentives and the timing of births: evidence from the German parental benefit reform of 2007
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Economic theory suggests that incentives matter for people’s decisions. This paper investigates whether this also holds for less self-evident areas of life such as the timing of births. We use a natural experiment when the German government changed its parental benefit system on January 1, 2007. The policy change strongly increased economic incentives for women to postpone delivery provided that they were employed. Applying a difference-in-difference-in-difference approach, we find very strong evidence that women with an employment history near to the end of their term indeed succeeded to shift births to the New Year and, therefore, could benefit from the new and more generous parental benefit system. Suggesting a model of chain reactions, we also report evidence that some women with due dates earlier in December tried but did not succeed to shift births to the New Year.
KeywordsTiming of births Economic incentives Parental benefits Policy reform
JEL ClassificationJ130 J180 H530 D190
This work started when Neugart was affiliated with the Wissenschaftszentrum Berlin für Sozialforschung which generously supported data purchase. Some of the work was done when Ohlsson enjoyed the hospitality of LEM, Université Panthéon-Assas, Paris II. This project was financially supported by a grant of the Central Research Committee of the Free University of Bozen/Bolzano. We would also like to thank the Forschungsdatenzentrum der Länder im Amt für Statistik Berlin-Brandenburg, in particular Matthias Klumpe, for their support in handling the data. Helpful comments and suggestions from Mikael Elinder, Jochen Kluve, Håkan Selin, and seminar participants at Bielefeld, London, and Växjö are gratefully acknowledged.
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