Can Education Subsidy Reverse Falling Fertility? The Case of Taiwan

Shao-Hsun Keng and Sheng-Jang Sheu

Journal of Development Studies, 2011, vol. 47, issue 11, 1677-1698

Abstract: The education subsidy in Taiwan is available for government employees only. In 1996, the government ceased to index the education subsidy for inflation, which created a natural experiment ideal for studying the effect of the education subsidy on fertility. Using the difference-in-differences approach, we find that the reform reduced the fertility probability for public-sector households by 17 per cent and this negative response appears to be permanent. The estimated probability elasticity of fertility is 0.05, which is smaller than that of personal tax exemption (0.8). The results also suggest that the education subsidy has a heterogeneous effect on fertility across income groups.

Date: 2011
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DOI: 10.1080/00220388.2011.609585

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