The challenge of returning low-fertility countries to a higher-fertility state has become especially clear in recent years. As noted in this post, aside from the post-WWII Baby Boom, there have been no significant episodes of increasing fertility. And that's not for want of trying. Some governments have become increasingly generous over time in their attempts to encourage higher fertility. Others have flailed around looking for a solution. One notable example is the Australian 'baby bonus', which initially paid each mother a lump sum of $3000 for each child born after 30 June 2004. The amount was increased to $4000 in July 2006, then to $5000 in July 2008, before being reduced to $3000, and eventually removed (and replaced with changes to the Family Tax Benefit) in March 2014.
How (un)successful have policies like Australia's baby bonus been? This new article by Sarah Sinclair (RMIT University) and co-authors, published in the journal Economic Modelling (open access), takes an unusual approach to answering that question. Rather than identifying policies and then testing directly for whether fertility changes happened at those points in time, Sinclair et al. first use time series models to identify structural breaks in the time series of fertility for 31 maternal-age-by-birth-order series. A structural break occurs when the time trend for the series changes meaningfully at a particular point in time. Using their approach, Sinclair et al. look for points in time where many of the time series have meaningful changes. What they find is not much of anything, with:
...the clearest and most consistently identified turning points for second births, with breaks in 2005 and 2015 detected across dates that plausibly align with major changes in family transfer settings. Other shifts, such as in selected age groups and some higher-order births, are less robust, and we detect no structural break in the aggregate fertility rate.
The timing of the 2005 and 2015 changes is consistent with the timing of the major changes to the baby bonus (or, at least, consistent with nine months after the major changes to the baby bonus). However, notice that they found effects only for second births, and not for births overall (or the aggregate fertility rate). That suggests, as they conclude, that the baby bonus affected the tempo of fertility, but not fertility overall. In other words, women brought forward the birth of a second child as a result of the baby bonus, but did not have more children overall.
Of course, identifying structural breaks is not the same as estimating a causal policy effect, but the timing of the breaks provides suggestive evidence about whether policy changes may have mattered. However, one aspect of this paper in particular is kind of unusual. When Sinclair et al. outline the 2005 and 2015 structural breaks in second births, their results are shown in Figure 5 in the paper:
The grey line tracks the second birth rate each month, while the red line shows the overall trend. Notice that in the top panel of the figure, there is a clear change in the trend in 2005. The pre-2005 trend is downwards, and then there is a big jump upwards in the second birth rate in 2005, before it returns to its previous downward trend. The oddity occurs in the lower panel of the figure, where Sinclair et al. show a somewhat less downward sloping trend in the second birth rate up to 2015, before there is a big jump up, and then a much steeper decline. The second figure ignores that there was already a structural break in 2005, where the trend jumped upwards. It seems to suggest that the end of the baby bonus induced a big increase in second birth rate. Now, that could be true, if couples anticipated the removal of the baby bonus, and tried to have a baby before the bonus was removed. However, Sinclair et al. don't really discuss this.
A more interesting interpretation occurs if you squint at the top panel of Figure 5, and imagine one structural break in 2005, and then a second at 2015. In between those two years, the trend in the second birth rate might be mildly upwards. Of course, we don't know this for sure, as Sinclair et al. didn't test for multiple breaks in their time series. But perhaps their results overstate the case against the fertility impacts of the baby bonus. To be clear, these would still be impacts on the tempo of fertility, not on total fertility, but perhaps the baby bonus did have an enduring effect on bringing forward second births. This would be something for future researchers to follow up on.
Nevertheless, this research adds to the evidence that relatively generous cash payments like Australia's baby bonus are unlikely, on their own, to reverse declining total fertility rates. It is becoming abundantly clear that low fertility will be an enduring feature of future population change.
Read more:
- The pandemic 'baby bust' in other countries
- Cohort effects and the downturn in US fertility since the Great Recession
- The new economics of fertility
- The economics of the falling total fertility rate in New Zealand
- The economics of fertility in high-income countries
- Can fertility return to replacement levels?
- You can make future population decline disappear just by changing the way you categorise people and fertility
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