| Abstract: | Many developed countries allow tax subsidies for families to help reduce the costs of bearing and rearing children. Whittington et al. in 1990 developed a theoretical model in which they estimated the effect of tax deductions for dependent children on fertility in the US. This paper develops an empirical model of estimation and reconsiders Whittington's work. Nonlinear specification of the demand curve for children is central to the new model. This change is made based on the hypothesis that nonlinear specification will better capture the shape of demand. Using annual time-series data over the period 1913-84, the study found the marginal effect of dependent exemptions to decrease with exemption level. Given the historically low recent levels of exemptions in real terms, increasing current exemptions will affect fertility to a greater extent than previously estimated. Graphically, results point to the existence of a concave demand for children. |
