Teenage Moms and Welfare Incentives

November 9th, 2009

Bryan Caplan has done yeoman’s duty for us all by reviewing “all the major research on the response of fertility to economic incentives.”

He finds a “striking contrast” between two types of literature:

In the “birth subsidy” literature, researchers usually find fairly large effects in the expected direction.  In the welfare literature, in contrast, most researchers find little or no evidence that welfare increases fertility–or that welfare reform reduces it.

Turning to what he calls the “single best piece in both literatures put together: Kevin Milligan’s ‘Subsidizing the Stork’,” (which devises a natural experiment based on Quebec subsidies for having children from 1988 to 1997), he reports Milligan’s finding that financial incentives have a big impact on fertility choices: “up to a 25% increase in fertility for families eligible for the full amount.”

But perhaps even more interesting: young, unmarried women are far less responsive to incentives.

…both findings suggest that, as a rule, young unmarried women get pregnant by mistake.  They’re far from affirmatively wanting a baby, so modest financial incentives don’t change their plans.

This suggests that policy efforts and government funds are best directed toward sex ed and encouraging/subsidizing contraception for teenage girls, rather than taking away benefits that supposedly encourage them to have children.

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