Determining the impact of the 2004 Australian Baby Bonus on fertility rates using a synthetic control analysis

Abstract

The longstanding issue of declining fertility in developed nations motivates a revaluation of the effectiveness of fertility-targeted policies. This thesis focuses on the 2004 Australian Baby Bonus, a past pronatalist incentive offering a lump sum financial transfer for every child born after 1 July 2004. We employ the synthetic control method to construct a counterfactual scenario for Australia in the absence of the policy's introduction. Using aggregate country-level data from the World Bank World Indicator's Database from 1998 to 2012, we carefully select suitable Organisation for Economic Co-operation and Development countries as control units and economic indicators to include as covariates. Our primary specification reveals a 6.82% increase in total fertility between 2005 and 2012, induced by the ABB. Robustness tests, including various model specifications, consistently confirm a positive fertility effect. This comparative case study provides a comprehensive analysis of the ABB's impact, emphasising the significance of methodological choices in assessing fertility-related policies.