Fertility and Labor Supply Responses to Child Allowances: The Introduction of Means-Tested Benefits in France

Abstract

This article examines fertility and labor supply responses to a 2014 French policy reform that consisted of conditioning the amount of child allowances on household income. Employing regression discontinuity design and French administrative income data, I find that restricting family allowance eligibility criteria decreases fertility among the richest households. The results also highlight that receiving half the amount of the allowances or none leads to an increase in both male and female labor supply through an increase in overtime work. The implied change in earned income, due to an increase in weekly working hours, is found to be comparable to the euro value reduction in benefits. Auxiliary regression analyses show that the fertility decline reflects a decrease in the probability of having an additional child for parents rather than in the probability of becoming parents for households without children.