The effect of government tax policies on fertility rates of educated women

Since the 1990s, various tax reforms have introduced and expanded childrearing-related tax credits, especially the Taxpayer Relief Act of 1997, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs Growth and Tax Relief Reconciliation Act of 2003 (JGTRRA). While the Child Tax Credit has helped households and families to shoulder the burden of childrearing, whether these childrearing-related tax credit expansions have influenced the fertility decision of women, particularly those with higher education, is the central question in this study. While some research shows a positive and significant effect of "tax subsidies" on the fertility rates of women in general, whether these "tax subsidies" have a positive effect on highly educated women is not yet clear. This study examines how different groups of women with different opportunity costs of childrearing respond to the tax benefit packages aimed at reducing the cost of childrearing. This study uses Panel Study of Income Dynamics (PSID) longitudinal data to test women's probability of having children based on the amount of the Child Tax Credit using a logit, fixed effects model, and focuses particularly on how educated women perceive and respond to tax credits. It finds that the Child Tax Credit has a positive and statistically significant effect on the probability of women's having an additional child, and the effect of child credit on fertility does not depend on the level of women's educational attainment.