The Effects of Negative Income Tax Programs on Fertility

An analysis of the effects of a negative income tax (NIT) program on fertility is presented in this paper. The model developed indicates that an NIT has three direct effects on fertility: (1) an income effect, (2) a direct subsidy effect, and (3) cost-of-time effects due to the higher tax rate of the NIT. The direct cost-of-time effects consist of both own- and cross-price effects. In addition, there are possible indirect effects due to the interaction of quality and quantity of children. The net impact is theoretically unknown because the income effect and the cross-price effects are of unknown signs. Empirically, we find strong significant negative effects of five-year financial treatment for married whites and strong positive effects for married Chicanas during the second and third years of the experiment.