EFFECTS OF FISCAL-POLICY ON FERTILITY DECISIONS IN QUEBEC

We use a nested polychotomous discrete choice model to evaluate the responsiveness of the behaviour of women in Quebec to changes in the expected flow of revenue resulting from modifications to the fiscal and transfer (family allowances) policies towards families with dependent children. We suppose that married women or those living under common law, who are 40 years old or less, are faced with three types of sequential decisions: the fertility decision, the decision relative to the number of children to have and the decision concerning labour force participation. The hierarchical process of decision defines eight situations that have an option value. The model is estimated with micro-data for the years 1984 to 1987 with a full information maximum likelihood method. Finally this empirical setting is used to simulate the effects of changes made to the fiscal and tranfer policies in favour of families with dependent children on fertility, labour force participation of women and spending costs for the State (governments). The estimated results and the simulations support the idea that personal taxes and family allowances that aim specifically at promoting natality could be potentially efficient.