Estimating Fertility Responses to Policy Measures in the German Democratic Republic

Everywhere the advent of industrial society and correspondingly high incomes has been accompanied by a fall in births. If one could only explain the fall unambiguously policy measures to counter it could be readily devised. Unfortunately there are many explanations, and from each follows a different policy prescription. If the income derived from women's work in offices and industry has become so high that they cannot afford the time to have children, then payments from the State to cover what they lose through child raising will offset that. If the obstacle is the cost of clothing and educating children to present high standards, then family allowances will serve and be much less expensive than replacing women's salaries. But if the reason for couples holding back is the danger of divorce, where the children would be a handicap to the single parent for work and for remarriage, then state subsidy is not so obviously the answer. And if the obstacle to childbearing is a shift in the culture from a familistic to an individual orientation then perhaps no affordable amount of money will induce people to have children. One could go on this way. If parents do not have children because they cannot find living premises sufficiently large for them, then housing subsidies are the answer. Some explanations of the fall in fertility lead to simple policy solutions; others would seem not to be amenable to any kind of policy. The inability to distinguish among competing theories of the fall of fertility means that theory cannot by itself prescribe policy. To get around the inability to understand theoretically we have resort to data. The present paper presents empirical evidence that in fact policy can make a difference. In order to do that it had first to measure the difference between fertility in West Germany and Austria on the one hand and East Germany on the other. Statistics show clearly that year by year since 1976 when policy measures were introduced in East Germany births have been higher by about half a child each year. But suppose that was due to parents just having earlier whatever number of children they were to have anyway; if this were so the rise in annual rates would be only temporary, and would have only a trifling long term effect. The authors establish that the rise in the East German rate is not of this character. And they also show that such a rise did not occur in West Germany and Austria. The measures that produced the rise included generous maternity leave, plus subsequent paid leave for working mothers, interest free marriage loans whose repayment was partly canceled on the birth or children. By concentrating on third and later children some of the benefits would have more effect on fertility for a given total expenditure. Unfortunately neither the East German authorities nor this paper's authors were able to distinguish the effect of the various elements in a somewhat heterogeneous package of policy measures, but they do show unambiguously the effect of the package as a whole.