Scandinavian Working Papers in Economics

Working Paper Series, Center for Fiscal Studies,
Uppsala University, Department of Economics

No 2009:10: Economic incentives and the timing of births: Evidence from the German parental benefit reform 2007

Michael Neugart and Henry Ohlsson ()
Additional contact information
Michael Neugart and Henry Ohlsson: Uppsala Center for Fiscal Studies, Postal: Department of Economics, Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

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 nautral experiment when the German government changed its parental benefit system January 1, 2007. The policy changes 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 5-6 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-codes: D19; H53; J13; J18

20 pages, October 12, 2009

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