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The zero effect of income tax on the timing of birth: some evidence on French data

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Abstract

The present paper investigates the correlation between the French tax rebate triggered by the birth of a child and the probability to bring forward childbirth from late December to early January. Using administrative tax data from 2010 to 2016, I precisely simulate the corresponding tax rebate for households in which a child was born from December 24 to January 7. Contrary to prior research, I do not find clear evidence of a significant link between the tax rebate brought about by a supplementary dependent child on the tax return and the probability of a late December birth. Either the amount of the incentive may not be large enough or households may not correctly anticipate the corresponding tax rebate. Nevertheless, a small learning effect is present. According to my results, a significant correlation between the tax rebate and the probability of having a child in December is observed among the wealthiest half of households with at least two children already claimed that also benefit from a relatively large tax rebate. However, this seems to be due to a spurious correlation. Instead, the results could reflect the willingness of parents to avoid childbirth on a public holiday.

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Notes

  1. Civil union or civil solidarity pact (“pacte civil de solidarité”) is a contractual form of cohabitation between two adults who cannot or do not want to marry. Note that civil unions and marriages are subject to the same tax rules in France. For the sake of simplicity, I refer to couples who are married or in a civil union as “married couples” throughout this paper. Cohabiting couples are excluded from the analysis. In contrast to married couples and civil union couples, they form two separate tax units and must optimally assign their children to one of the tax units to optimize tax rebates. Around 25 percent of them fail to minimize their liability (see Bargain et al., 2022). According to the French Statistical Institute (INSEE, 2011), cohabiting couples represent 20% of French families.

  2. With one dependent child, this threshold was equal to €2,336 in 2010 and 2011, €2,000 in 2012, €1,500 in 2013, €1,508 in 2014, €1,510 in 2015, and €1,512 in 2016.

  3. Taxpayers who are eligible to pay low levels of income tax can benefit from supplemental tax relief to alleviate the impact of entering the progressive income tax scale. This additional tax benefit makes the effect of the family quotient on tax savings less clear to analyze. I refer the reader to Figure A1 in the Online Appendix for a graphical overview of the tax rebate caused by an additional dependent child with the inclusion of supplemental tax relief. The additional tax relief is taken into account in the simulation of the tax rebate used to estimate the different models.

  4. Around 42% of married couples in the original dataset report dependent children under 18 years of age on their tax return. Very few report children born during the course of the year as well as children aged 18 years and older.

  5. For this purpose, I use the consumer price index provided by the French National Institute of Statistics (index base 100 in 2015).

  6. The progressive income tax schedule \(t()\) used to simulate tax liability is presented in Table A2 in the Online Appendix. As can be seen, \(t()\) may evolve slightly from one year to another in terms of both the tax brackets and the marginal tax rates.

  7. Regarding childbirth in France, the onset of labor was spontaneous in 68.6% of cases in 2016 and 66.9% of cases in 2010 (see “Enquête nationale périnatale Rapport 2016,” INSERM and DREES). The rate of labor induction was 22% in 2016 and 22.1% in 2010, respectively. The C-section rate remains stable at around 20% of all deliveries in the 2010s (see “Les Etablissements de Santé Edition 2020,” DREES). Medical interventions such as labor induction and C-section vary little from one region to another, although labor induction is slightly more frequent in Paris region (25.6% in 2016). The proportion of births by C-section varies greatly with the gestational age or birth weight of the child. However, the data at my disposal do not include this information. I also lack information on the type of delivery.

  8. The inverse hyperbolic sine transformation to a variable approximates the natural logarithm of that variable and allows retaining non-strictly positive data values. I thank an anonymous referee for suggesting this specification.

  9. Very few households with \(TR_{i} \le s\) and \(R_{i} > r\) have more than one child. Therefore, I only distinguish between families with and without children when \(TR_{i} \le s\) and \(R_{i} > r\).

  10. Preterm: gestational age at birth < 37 weeks; early term: gestational age at birth 37–38 weeks; full term: gestational age at birth 39–41 weeks; post-term: gestational age at birth > 41 weeks.

  11. Parents’ education level is not included in the EDP but can be obtained from the census. Since the census is not conducted annually for the entire population, not all households present in the EDP in a given year are included in the census of that particular year. Therefore, the samples are reduced in this case by at least one third. I estimated the regression models (1), (2), and (3) on these smaller samples. On the whole, the results are consistent with those obtained from the baseline samples, indicating that parents’ education level does not have any significant effect on the probability of a December birth. These results are available upon request.

  12. I even observe a change of sign in the estimate from positive to negative when the number of births accounted for in the regression includes at least 5 days around the turn of the year (see Fig. 2).

  13. This is not surprising given the short time window used in the analysis to assess the births and the fact that the distributions of sociodemographic variables are well balanced between December and January parents. Therefore, our results differ from those of Buckles and Hungerman (2013) and Clarke et al. (2019), who find a significant effect of socioeconomic characteristics on the timing of birth on a monthly or quarterly basis.

  14. The 95 percent confidence interval (Fig. 2) overlaps with the 95 percent confidence interval of Lalumia et al. (2015), which ranges from around 0.016 (lower bound) to around 0.022 (upper bound).

  15. The inverse hyperbolic sine transformation lowers the correlation between the tax rebate and the household income.

  16. I also estimated the regression model (3) with other threshold values for \(s\) and \(r\). The results are similar. Because of the strong correlation between tax rebate and taxable income, the value intervals for these two variables must be large enough so that their intersections contain a sufficient number of observations.

  17. During this period, the cesarean delivery rate peaked at 32.9% (2009) in the USA after several years of growth (24.4% in 2001).

  18. I am not aware of any publicly available statistics for elective induction rates in the USA. Figures on C-section rates for the USA are based on publicly available data on births from the National Vital Statistics Report 2014, vital statistics of the USA from 1989 to 1993, and Notzon et al. (1994). The US figures on induction rates are based on the online NHCS Data Brief 2014. To my knowledge, statistics for elective C-sections requested by mothers are not available. Monthly statistics on C-sections and labor induction are also not available.

  19. Note, however, that the tax rebate is also estimated in Dickert-Conlin and Chandra (1999), Schulkind and Shapiro (2014), and Lalumia et al. (2015).

  20. Results are available upon request.

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Acknowledgements

I thank the editor for his valuable guidance throughout the reviewing process. I also thank one anonymous reviewer for their comments.

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  1. Department of Economics, Université de La Réunion, Saint-Denis, France

    Nicolas Moreau

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Moreau, N. The zero effect of income tax on the timing of birth: some evidence on French data. Int Tax Public Finance 30, 757–783 (2023). https://doi.org/10.1007/s10797-022-09733-1

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