2024
Language:
English

How Cash Incentives Can Affect Childbearing Among Low-Income Women

The study analyzes how a guaranteed income program that significantly increases work incentives affects childbearing among previously unemployed women. Results from previous research indicate that improving individuals’ financial circumstances could increase fertility by compensating for the costs of childbearing. However, overall changes in cash incentive structures may create causal mechanisms with opposite effects. The study provides new empirical evidence on the effect of cash transfers on childbearing by using register data from the Finnish basic income experiment conducted in 2017–2018. The intervention aimed to increase returns from employment relative to unemployment but, at the same time, disincentivized childbearing in relation to competing activities, such as employment and studying. The experiment offers a unique opportunity to study the causal effect of changes in income and cash incentives on childbearing decisions. The results of the study indicate that the experiment had a negative effect on the probability of having children among women who received basic income and a positive effect among women whose spouses received basic income. The findings emphasize the importance of considering the overall changes in the cash incentives when reforming tax-benefit policies to avoid potentially undesired social consequences.