As we wind down 2015, I thought it would be timely to revisit a topic that I first explored in my inaugural blog post, posted just over two years ago to today. That blog post talked about research that had been conducted that people time deaths to benefit from a lower tax regime. You might be interested to know that research has similarly shown that people also time births to benefit from lower taxes or higher tax benefits. What, you say?! Before you start thinking that people are making plans nine months ago, what we are really talking about is manipulating the delivery date.
The seminal paper in this area was by Dickert-Conlin and Chandra (1999). They considered the U.S. child tax benefit system that granted a whole year of tax relief to an individual or family that had a child in that tax year, even if the child was born on 31 December. The authors found that such a system provided incentives for more children to be born in the last week of December rather than the first week of January; namely that a $50 increase in benefits led to a 1.4 percentage point increase in the probability of a December birth. Using a more comprehensive data source, LaLumia, Sallee, and Turner (2015), however, found a smaller magnitude: that a $1,000 increase in benefits was necessary to incite the same behavourial response as reported by Dickert-Conlin and Chandra (1999). A similar study was conducted in Japan by Kureishi and Wakabayahsi (2008) that similarly found that a system that grants a year’s worth of tax relief to parents regardless of when in the tax year a child was born increased the probability of a December birth.
These are interesting results that likely also applied to Canada prior to 1993. In 1944, Canada introduced the Family Allowance Act which provided family allowances to all children up to age 16, provided they were attending school. This is considered to be Canada’s first universal welfare program and while the payments were provided monthly, payments were based on the age of the child and not the birth month. That is, if your child was born on December 31, you got a whole year of payments for that child. It was not until 1993 with the advent of the Child Tax Benefit that the payments were calculated on a monthly basis and were means tested.
Similar behavioural responses have also been found related to the parental benefit system and the school start date system. Gans and Leigh (2009) studied the effect of a $3,000 Australian baby bonus that applied to children born on or after 1 July 2004, and announced on May 11, 2004. The authors found a significant increase in the number of births that occurred on 1 July 2004, so much so that more children were born on that day than on any other single date in the past 30 years. Neugart and Ohlsson (2013) found that an increase in parental benefits that took effect on 1 January 2007 in Germany caused births to be shifted from December 2006 to January 2007, notably a 6 percentage point increased probability of giving birth in the first week of January over the last week of December. Finally, Dickert-Conlin and Elder (2010) examine whether school eligibility cutoff dates shift births to just prior to the legislated cut-off date, arguably as a way to reduce child care costs. They found no evidence that this occurs, a finding which is unsurprising given the offsetting desire to push a birth to just after the legislated cut-off date as a way to ensure the child has a physical, mental, and maturity advantage over their child’s classmates.
These findings show that public policy can have unintended consequences on the timing of births. However, because we are only considering a change in births over a range of a few days, there are unlikely to be any follow on concerns related to birth seasonality and health, school readiness, or related issues. That said, to the degree that these shifts are caused by unnecessarily inducing births or using medical interventions to delay births, there may be increased risk of maternal and fetus health complications, something that is of great concern and why public policy makers need to account for such unintended consequences when designing supports for families with children.