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Economic incentives and the timing of births: evidence from the German parental benefit reform of 2007

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Abstract

Economic theory suggests that incentives matter for people’s decisions. This paper investigates whether this also holds for less self-evident areas of life such as the timing of births. We use a natural experiment when the German government changed its parental benefit system on January 1, 2007. The policy change strongly increased economic incentives for women to postpone delivery provided that they were employed. Applying a difference-in-difference-in-difference approach, we find very strong evidence that women with an employment history near to the end of their term indeed succeeded to shift births to the New Year and, therefore, could benefit from the new and more generous parental benefit system. Suggesting a model of chain reactions, we also report evidence that some women with due dates earlier in December tried but did not succeed to shift births to the New Year.

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Notes

  1. Note that from the perspective of using control years which show the same day pattern in a time window 7 days before and 7 days after the policy change, the 2000–2001 pair of years would have been particularly interesting as in this respect it is equivalent to the treatment years 2006 and 2007. However, it happens that in these years, a legislative change in educational benefits occurred.

  2. All quotes were translated by the authors.

  3. There is also a related literature on the timing of death with contributions from Kopczuk and Slemrod (2003), Gans and Leigh (2006), and Eliason and Ohlsson (2008, 2010).

  4. While we study incentives to shift birth for women already being pregnant having an employment history or not, there is also a literature studying fertility in relation to women’s employment. See, e.g., Gutierrez-Domenech (2008).

  5. The corresponding bills from which this information is taken are the Bundeserziehungsgeldgesetz (BErzGG) and the Bundeselterngeld- und Elternzeitgesetz (BEEG).

  6. See Appendix for more details on income limits.

  7. Kluve and Tamm (2012) evaluate the taking up of leaves of the German parental benefit reform.

  8. This assumes a net yearly income of 32,239 in which case no transfers would have been paid for the first 6 months under the old regime and from month 7–12 transfers would have been cut by 7.2% in relation to the income exceeding a threshold of 30,000 euros.

  9. Two examples taken from the household income records of the Statistische Bundesamt may help bring the transfers from the parental benefit into perspective with gross incomes and net incomes after tax and social security payments. According to Statistisches Bundesamt (2008), a single parent’s gross monthly labor income was EUR 1,255 on average in year 2006. He or she had to pay EUR 151 taxes and EUR 251 in social security contributions. Thus, the base for calculating the parental benefit would have been EUR 853. As a second example, take the average gross monthly household labor income of a couple with children. This amounted to EUR 3,719 with tax and social security contributions being EUR 537 and EUR 606, respectively. If both partners contributed equally to the household income, then the base for calculating the 67% of transfers is EUR 1,288.

  10. The employment rate of women for the data on which Table 2 is based is 39.8% compared to 45.5% in our sample. Sample sizes are available from the authors upon request.

  11. See the Bundestagsdrucksache 16/1889 dated June 20, 2006.

  12. C.f. Bundestagsdrucksache 16/2454 dated August 25, 2006.

  13. See the Bundesgesetzblatt Jahrgang 2006 Teil 1 Nr. 56, issued in Bonn on December 11, 2006.

  14. See Süddeutsche Zeitung, Regionalausgabe, December 30, 2006.

  15. No standard errors are reported as they directly follow from the means given that we have dummy variables.

  16. A referee suggested that the differences between employed and not employed women might be driven by differing access to health care. But this occurs unlikely to us given the egalitarian German health-care system under which 85% are covered by the public health insurance (Hajen et al. 2010) which provides equal service by law.

  17. Additional descriptive statistics is provided in the Appendix.

  18. Readers might be concerned about an analysis of delays of birth by 3 weeks given that births may not be shifted by more than a few days. While we, in principle, agree on the impossibility to postpone birth by more than a few days, one has to take into account uncertainty related to conception and gestation periods. These uncertainties combine to uncertainty regarding the natural delivery date and warrant, from our point of view, such an analysis.

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Acknowledgements

This work started when Neugart was affiliated with the Wissenschaftszentrum Berlin für Sozialforschung which generously supported data purchase. Some of the work was done when Ohlsson enjoyed the hospitality of LEM, Université Panthéon-Assas, Paris II. This project was financially supported by a grant of the Central Research Committee of the Free University of Bozen/Bolzano. We would also like to thank the Forschungsdatenzentrum der Länder im Amt für Statistik Berlin-Brandenburg, in particular Matthias Klumpe, for their support in handling the data. Helpful comments and suggestions from Mikael Elinder, Jochen Kluve, Håkan Selin, and seminar participants at Bielefeld, London, and Växjö are gratefully acknowledged.

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Authors and Affiliations

  1. Department of Law and Economics, Technical University of Darmstadt, Marktplatz 15, 64283, Darmstadt, Germany

    Michael Neugart

  2. Department of Economics, Uppsala University, Box 513, 751 20, Uppsala, Sweden

    Henry Ohlsson

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  1. Michael Neugart
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  2. Henry Ohlsson
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Correspondence to Michael Neugart.

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Responsible editor: Junsen Zhang

Appendix

Appendix

  • Before (Erziehungsgeld):

    • In 300 euro option, no transfers were paid within the first 6 months if the yearly income of couples was above 30,000 euros and of singles above 23,000 euros; from the seventh month onwards, transfers were paid at a reduced amount if the income was above 16,500 for couples or 13,500 singles. The reduced amount was calculated as 300 euros minus 5.2% of the income exceeding the income limits.

    • In 450 euro option, no transfers were paid within the first 6 months if the yearly income of couples was above 30,000 euros and of singles above 23,000 euros; from the seventh month onwards, transfers were paid at a reduced amount if the income was above 16,500 for couples or 13,500 singles. The reduced amount was calculated as 300 euros minus 7.2% of the income exceeding the income limits.

    • In both options, income limits increased by 3,140 euros for every additional child living in the household.

  • After (Elterngeld):

    Transfer is 67% of the average net income of the 12 months preceding the birth of the baby up to a maximum of 1,800 euros. A minimum payment of 300 euros irrespective of the employment history is guaranteed.

The dataset comprises 16 states and 451 communities (Table 8).

Table 8 Descriptive statistics
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Neugart, M., Ohlsson, H. Economic incentives and the timing of births: evidence from the German parental benefit reform of 2007. J Popul Econ 26, 87–108 (2013). https://doi.org/10.1007/s00148-012-0420-1

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