Economic Incentives and the Timing of Births: Evidence from the German Parental Benefit Reform 2007

21 Pages Posted: 20 Aug 2009

See all articles by Michael Neugart

Michael Neugart

Technical University of Darmstadt

Henry Ohlsson

Uppsala University - Department of Economics

Date Written: August 17, 2009

Abstract

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 make use of a natural experiment when the German government changed its parental benefit system January 1, 2007. The policy change strongly increased economic incentives for women to postpone delivery to the new year provided that they were employed. The incentives for women not employed were not the same, they could gain slightly from giving birth before the policy change. 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 and became subject to the new and more generous parental benefit system. We estimate the quantitative impact to correspond to a 5 to 6 percentage points increased probability to give birth the first seven days of 2007 rather than the last seven days of 2006 for employed women.

Keywords: timing of births, economic incentives, parental benefits, policy reform

JEL Classification: J13, J18, H53, D19

Suggested Citation

Neugart, Michael and Ohlsson, Henry, Economic Incentives and the Timing of Births: Evidence from the German Parental Benefit Reform 2007 (August 17, 2009). Available at SSRN: https://ssrn.com/abstract=1456407 or http://dx.doi.org/10.2139/ssrn.1456407

Michael Neugart (Contact Author)

Technical University of Darmstadt ( email )

Hochschulstraße 1
Darmstadt, 64289
Germany

HOME PAGE: http://www.vwl3.wi.tu-darmstadt.de

Henry Ohlsson

Uppsala University - Department of Economics ( email )

Box 513
Uppsala, SE-75120
Sweden
+46 18 471 51 04 (Phone)

HOME PAGE: http://www.uueconomics.se/henryo/

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