Bonus Question

ABS births data out yesterday show another increase in fertility – from 1.79 babies per woman in 2005 to 1.81 in 2006. In the midst of an election campaign, the question naturally arises: how much credit can the baby bonus take for this increase?

I’m not aware of anyone who’s managed to parse out baby bonus effects from other slow-moving changes. This is a classic problem in time series econometrics, made messier by the fact that the impact of incentives on fertility takes effect with a lag. But one thing seems obvious: a flat $4187 is likely to have a bigger impact on the decisions of low-income families than high-income families. We don’t have data in the ABS births release on fertility by income, but they do tell us that the largest increase wasn’t among 20-29 year old mums, it was among the 30-39 year old mums. If this was a policy-induced change, that’s not the way you’d expect it to play out.

Update: I now realise that Andrew Norton made almost an identical point yesterday afternoon (also noting that teen births have continued to decline).

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8 Responses to Bonus Question

  1. I agree, no evidence of any change – though the low SES data would be interesting. You could probably work it out from the census. The decline in teen births also counts against the baby bonus having an effect.

  2. Andrew Leigh says:

    Andrew, I agree about the census thing, though it’s because it relies on the assumption of the declining marginal utility of money, it won’t convince everyone. It is on my to-do list, though.

  3. backroom girl says:

    Andrews

    The teen birth story is a bit mixed, I think. While yesterday’s publication did show a decline in all States and Territories, according to the ABS the teen birth rate is actually higher than a few years ago, except in Qld. NSW and Vic (the States that contain most of Australia’s teens, of course).

    So there might be a bit of a socio-economic story there, I guess (I have certainly heard anecdotes from people who work with ‘troubled teens’ that quite a few think that having a baby to get the bonus is a good idea). The other interesting little titbit is that apparently the number of births among mothers who already have two or more children is also up – this could also be consistent with a socio-economic effect.

    I have always thought that for most middle class women, if there was any positive effect of the baby bonus it would be on timing (ie it might enable women to have a child earlier than they otherwise might have). And there has been an upturn in women having their first child within the first two years of marriage, which seems to be consistent with that story.

  4. MsLaurie says:

    Another tricky issue is all the media attention in the last few years, especially since the introduction of the baby bonus, around the fact that IVF is not a miracle cure, and waiting too long often results in infertility – a lot more people in their early 30s are just having the baby, rather than waiting longer, due to higher knowledge of complications.

    Drawing out that public knowledge increase versus financial incentives effect would be very difficult.

  5. Jennifer says:

    I blogged a little about the birth statistics a while back:
    http://penguinunearthed.wordpress.com/2007/07/13/fertility/

    but not about whether income made a difference. My take is that the increase in births recently is all about the general delay in age of motherhood (and the corresponding motherhoods from women born in and around 1970), and nothing to do with any extraneous incentives. I’m not sure that I can prove that, but it makes more sense than the baby bonus causing it.

  6. Pingback: Andrew Leigh » Blog Archive » Plus ça change

  7. Andrew Leigh says:

    Jennifer, fascinating post – thanks for drawing my attention to it. Indeed, it was only when I looked at your link to the Oct 2006 ABS release that I realised this year’s ‘change’ is due to the 2005 data being revised downwards.

  8. Jennifer says:

    Thanks, and very amusing that the birth rate appears stuck at 1.81! Well spotted.

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