Changes in Family Income around the Time of Birth of Children in Germany between 1985 and 2004

Abstract

While the course and the determinants of fertility behaviour have been investigated intensively, the monetary consequences of birth have hardly been considered empirically to date. Therefore, this paper focuses on the short-term (equivalent) household income changes around the time of births in a longitudinal perspective and examines them for their causes. For the analyses of the longitudinal data (GSOEP-Data 1984-2005), fixed effects panel regression models were computed. The results show that the short-term socioeconomic consequences of birth have clearly increased in the last two decades and first births in particular are associated with disproportionately severe socioeconomic consequences, while further births are rarely accompanied by negative changes in the households’ socioeconomic situations. Furthermore, household income losses attributable to births only arise in double income households and increase gradually in line with a rising level of household income before birth. Hence, the analyses suggest the need for more adequate state assistance with respect to family support. Beside the provision of adequate infrastructural conditions which allow mothers to be employed, also the payments to compensate for child-related costs (“Kindergeld”) should be – in contrast to the present practice in Germany – increased and re-adjusted with respect to the child’s position in the birth sequence.