(WITHDRAWN) Can Public Spending Stall Declining Fertility Trends? Evidence from 38 OECD Nations from 1980 to 2020

Background & Purpose: Declining fertility rates is a point of concern for many nations that calls for timely policy efforts. There are several explanations for the global declining fertility rates – while female labor participation rates grow, the rising costs of raising a child and the competing demands between work and family that mothers face make having additional children a challenging and costly matter. Falling fertility rates, in conjunction with rising life expectancy, pave the way for an aging and imbalanced population, which may impact the future wellbeing of all individuals across the social distribution and the future fiscal stability. Countries have been making public investments to improve infrastructures that are conducive to having (more) children, however, it is still an open empirical question whether public expenditures can effectively stall declining fertility trends. Moreover, the current evidence on the impact of country-level public expenditures on fertility rate is primarily focused on Western European and English-speaking countries – a large limitation in our current understanding of the topic.

Methods: This study aims to examine the effect on a country’s total fertility rate (TFR) of two social expenditures, namely, the 1) total public expenditures, and 3) public expenditures on families. We analyze 38 OECD countries, including eight in Eastern Europe, four in Latin America, and two in East Asia, as well as 14 Western Europe and English-speaking countries. We utilize OECD social expenditure (SOCX) data from 1980 to 2020 (N = 1,558), and employ two-way fixed effects and instrumental variable (IV) models to estimate the effect of increasing public spending on countries’ TFR. We also explore whether social expenditures differentially impact fertility by continents with an interaction term in both our fixed effects and IV specifications.

Preliminary Results: Our preliminary results from both models indicate the positive role of public expenditures in promoting TFR, although the size of the impact differed by specifications. The analysis with continent interaction terms reveal interesting heterogeneity in the association between social expenditures and TFR.

Conclusion & Implications: The results suggest that the size and generosity of a country’s public spending matters to slow down or rebound the declining fertility trend. However, the impact may vary by the social contexts around falling fertility. Our findings inform future policy decisions in response to declining fertility rates, to strengthen social infrastructures for families worldwide.