Family policy and the number of children: Evidence from a natural experiment

This paper analyzes the effects of family policy on the number of children. A natural experiment which changed regional family policy dramatically was Saarland's reaccession to Germany in 1957. Prior to this date, Saarland was part of France. After 1957, families in Saarland were subject to spouse income splitting instead of the previous family income splitting and other aspects of family policy also changed fundamentally with Saarland's reaccession to Germany. We identify the causal impact of this change by using panel data on newborn children in 45 municipalities in Saarland, and 350 municipalities in surrounding regions in Germany and France. The results suggest that the change in family policy associated with Saarland's reaccession to Germany led to a reduction of births by about one-fifth.

► We analyze the effects of family policy change on the number of children. ► We use Saarland's re-accession to Germany in 1957 as a natural experiment. ► We identify the causal impact of this change at the level of municipalities. ► We use data on 45 municipalities in Saarland and 350 in Germany and France. ► We find that the change led to a reduction of births there by one-fifth.