The Earned Income Tax Credit and Fertility

Government programs designed to provide income safety nets or to encourage work often restrict eligibility to families with children, in an attempt to keep the programs well targeted. One potentially unintended consequence of the design of these programs is that if they lower the costs associated with having children, economic theory suggests that they may encourage childbearing. This paper considers whether dramatically changing incentives in the Earned Income Tax Credit (EITC) affect fertility rates in the United States. We use birth certificate data spanning the period 1990 to 1999 to test whether expansions in the credit influenced birthrate among targeted families. While economic theory would predict that a positive fertility effect of the program for many eligible women, our baseline models show that expanding the credit produced only extremely small reductions in higher-order fertility among white women. We also find evidence that suggests changes in marriage patterns may be related to changing fertility rates. For example, higher levels of the EITC are associated with higher first birth rates among married women and lower first births among unmarried women. This may suggest that the EITC encouraged marriage among single women