Universal Transfers, Tax Breaks and Fertility: Evidence from a Regional Reform in Norway

Abstract

The relatively high fertility in the Nordic countries has attracted considerable academic and political interest. Still, the causal relationship between economic circumstances and fertility in the Nordic context is poorly understood. This paper estimates the effect of tax breaks and universal transfers on fertility in the Nordic context. We analyze the fertility effects of a regional child benefit and tax reform implemented in the northern municipalities of the Norwegian county Troms, using the southern municipalities of the same county as a plausible and empirically similar control group. We use a difference-in-difference/event study design, and estimate multivariate models on individual-level data from administrative registers for the full population. The reform increased fertility among women in their early 20 s. The effects are concentrated among unmarried women, who received the largest subsidies. Our findings suggest that favorable economic conditions have contributed to the relatively high fertility in the Nordic countries.