How Changes in Cash Transfers Can Affect Childbearing Among Low-Income Women: Evidence from the Finnish Basic Income Experiment.

Abstract

The study analyses how a two-year guaranteed income program that provided a significant earnings supplement affected childbearing among previously unemployed women. Results from previous research indicate that cash transfers may increase fertility, for example, by compensating for the additional costs of childbearing and lost earnings opportunities. However, cash transfers may also induce incentives that lead to opposite fertility effects. The study provides new empirical evidence on the effect of cash transfers on childbearing by using register data from the Finnish basic income experiment conducted in 2017-2018. The intervention increased returns from employment relative to unemployment. As a result, it increased cash incentives to employment and other activities, such as studying, that compete with childbearing. The experiment offers a unique opportunity to study the causal effect of these changes on women's childbearing decisions. According to the analysis, the experiment had a negative effect on the probability of having children among women who received basic income and a positive effect among women whose spouses received basic income. The findings suggest that while improvements in economic circumstances likely have a positive effect on childbearing, benefits conditional to working or other competing activities may have the opposite effect, at least in the short term. The findings emphasize the importance of considering the overall changes of income and cash incentives when reforming tax-benefit policies.