Taxes and the Family: The impact of the tax exemption for dependents on marital fertility

In this paper I use data from the Panel Study on Income Dynamics to examine the relationship between the dependent exemption feature of the United States federal income tax (an unambiguous subsidy to dependents) and the fertility behavior of married couples over the period 1979-1983. The exemption decreases the price of a child to a household, thus having a direct relationship to the timing and/or number of children observed in a family. Conditional logit results support this hypothesis by showing that the exemption has a positive and significant impact on the likelihood of having a birth during the period under study.