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Government policies can have a modest effect on
raising fertility—but broader social changes lowering fertility are
stronger
Since 1989 fertility and family formation have
declined sharply in Central and Eastern Europe and the former Soviet Union.
Fertility rates are converging on—and sometimes falling below—rates in
Western Europe, most of which are below replacement levels. Concerned about
a shrinking and aging population and strains on pension systems, governments
are using incentives to encourage people to have more children. These
policies seem only modestly effective in countering the impacts of
widespread social changes, including new work opportunities for women and
stronger incentives to invest in education.
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What are the implications of childcare subsidies
for care quality, family well-being, and child development?
Most public expenditure on childcare in the US is made through a federal program, the Child Care and Development Fund
(CCDF), established as part of landmark welfare reform legislation in 1996.
The main goal of the reform was to increase employment and reduce welfare
dependence among low-income families. Childcare subsidies have been
effective in enabling parents to work, but apparently at some cost to the
well-being of parents and children.
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Inheritance-related work disincentives can be
strong, but labor supply could increase if bequests facilitate
entrepreneurship
Inheriting money can be a problem since the new
wealth might sap the beneficiaries’ incentive to work. Or it could do the
opposite, by facilitating entrepreneurship among those whose ambition to
start a business had been stymied by a lack of cash. Recent evidence
suggests inheritance-related work disincentives can be strong—unexpected
inheritances can matter a lot for early retirement, for example. But where
inheritances facilitate self-employment, as some evidence suggests, the
labor supply might increase.
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Investing in female human capital can reduce
brideprice and dowry practices and increase welfare
Payments at the time of marriage, which are
ubiquitous in developing countries, can be substantial enough to impoverish
parents. Brideprice and dowry have both been linked to domestic violence
against women, and inflation in these payments has prompted legislation
against them in several jurisdictions. Marriage payments are often a
substitute for investment in female human capital, so from a welfare and
policy perspective, they should be prohibited. This highlights the
importance of promoting direct economic returns over legal and customary
rights.
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Universal early education can be beneficial, and
more so for the poor, but quality matters
There is widespread interest in universal early
education, both to promote child development and to support maternal
employment. Positive long-term findings from small-scale early education
interventions for low-income children in the US have greatly influenced the
public discussion. However, such findings may be of limited value for
policymakers considering larger-scale, more widely accessible programs.
Instead, the best insight into the potential impacts of universal early
education comes from analysis of these programs themselves, operating at
scale. This growing research base suggests that universal early education
can benefit both children and families, but quality matters.
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Patterns of labor market assimilation for
married immigrant women are similar to those for men
What is the role of married women in immigrant
households? Their contribution to the labor market has traditionally been
considered of secondary importance and studied in the framework of temporary
attachment to the labor force to support the household around the time of
arrival. But this role has changed. Evidence from major immigrant-receiving
countries suggests that married immigrant women make labor supply decisions
similar to those recently observed for native-born married women, who are
guided by their own opportunities in the labor market rather than by their
spouses’ employment trajectories.
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Knowing the real cost of children is important for crafting better economic policy
The cost of children is a critical parameter
used in determining many economic policies. For instance, correctly setting
the tax deduction for families with children requires assessing the true
household cost of children. Evaluating child poverty at the individual level
requires making a clear distinction between the share of family resources
received by children and that received by parents. The standard ad hoc
measures (equivalence scales) used in official publications to measure the
cost of children are arbitrary and are not informed by any economic theory.
However, economists have developed methods that are grounded in economic
theory and can replace ad hoc measures.
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Generous parental leave and affordable,
high-quality childcare can foster children’s abilities
The economic and psychological literatures have
demonstrated that early investments (private and public) in children can
significantly increase cognitive outcomes in the short and long term and
contribute to success later in life. One of the most important of these
inputs is maternal time. Women’s participation in the labor market has risen
rapidly in most countries, implying that mothers spend less time with their
children and that families rely more on external sources of childcare. This
trend has raised concerns, and an intense debate in several countries has
focused on the effectiveness of childcare policies.
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As immigration lowers childcare and housework
costs, native-born women alter their work and fertility decisions
Many countries are reviewing immigration policy,
focusing on wage and employment effects for workers whose jobs may be
threatened by immigration. Less attention is given to effects on prices of
goods and services. The effect on childcare prices is particularly relevant
to policies for dealing with the gender pay gap and below-replacement
fertility rates, both thought to be affected by the difficulty of combining
work and family. New research suggests immigration lowers the cost of
household services and high-skilled women respond by working more or having
more children.
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The success of policies raising the retirement
age depends on people’s responsiveness to changes in pension eligibility
Rising life expectancy and the growing fiscal
insolvency of public pension systems have prompted many developed countries
to raise the pension entitlement age. The success of such policies depends
on the responsiveness of individuals to such changes. Retirement has
increasingly become a decision made jointly by a couple rather than
individually by one partner. The empirical evidence indicates that almost a
third of dual-earner couples in Europe and the US coordinate their
retirement decision despite age differences between partners. This joint
determination of retirement has important implications for policies intended
to reduce the burden of pension costs.
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