Financial incentives, fertility and early life child outcomes

This paper investigates the short term effects of financial incentives on fertility and early life child outcomes, by exploiting a substantial and unanticipated reform regarding maternity leave benefits: the switch from earnings dependent to fixed benefits, announced in April 2003 in Romania. Most employed women significantly gained from the reform, but high earning women were disadvantaged. Using Reproductive Health Survey data, I analyze the effects on live births, conceptions, abortions and early life child outcomes. The change in financial incentives did not influence short term conception rates but significantly decreased the probability of abortion, by a very large margin, leading to more live births. Outcomes related to early life chid development, such as prenatal maternal investments, child health at birth and breastfeeding, do not appear to be affected in the short run by the large average increase in maternity leave benefits.