The Effect of Benefits on Single Motherhood in Europe

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The Effect of Benefits on Single Motherhood in
Europe

• Libertad González
• Universitat Pompeu Fabra
• May 2006

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Summary

• I estimate the effect of benefits available to
  single mother households on the incidence of
  single mothers in Europe.
• I use ECHP data for 14 countries from 1994
  through 2001.
• I try to establish causality by introducing
  country fixed-effects and year effects that vary
  by country or group of countries.
• I find that there is a small but significant
  positive association between benefit levels and
  the incidence of both out-of-wedlock childbearing
  and divorce among married mothers.

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Contribution

• The effect of benefits on single motherhood has
  been studied before only in the context of a
  single country, mostly the US and the UK.
• This is the first paper to analyze the impact of
  benefits on the incidence of female-headed
  households in Europe.
• The novelty of the approach comes from
  integrating different countries into a common
  framework.
• Deriving identification from changes in benefits
  over time and how they are followed by changes in
  the incidence of single mothers.
• Accounting for unobserved variables at the
  country level and unobserved changes over time.

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Outline

1. Motivation
2. Previous literature
3. Data and methodology
4. Results
5. Conclusion

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Motivation

• Dramatic increase in the prevalence of single
  mother families in some Western countries (US,
  UK) during the past 4 decades
• From 8 of all families with children in 1960 to
  24 in 2002 in the US.
• Questions raised
• What can explain these striking changes in family
  structure?
• What are the consequences on the well-being of
  women and children?

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Motivation (ii)

• Large literature on the effects of economic
  variables on single motherhood trends in the US.
• What about other countries?
• Substantial cross-country variation in the
  prevalence of single mothers and its evolution
  over time.
• Do economic variables play any role in explaining
  this cross-country variation?
• Public assistance.
• Labor market conditions.
• Supply of marriageable men.

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Number of Single Mothers as of All Women,
1994-2001
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Outline

1. Motivation
2. Previous literature
3. Data and methodology
4. Results
5. Conclusion

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Theoretical Approach

• Beckers work on the effect of economic variables
  on fertility and partnership decisions.
• Assuming that these decisions are affected by the
  expected costs and benefits of the different
  choices available to the individual.
• The theory unambiguously predicts that higher
  benefits available to single mothers would
  increase the incidence of single motherhood.

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Literature on the Prevalence of Single Mothers in
the US

• Usual empirical strategy
• OLS (Moffitt 2000), linear probability model
  (Hoynes 1997), Probit model (Moffit 1994, Blau
  et al. 2004).
• Time, state, MSA, and/or individual fixed
  effects.

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Effect of Benefits

• Large literature on marriage and fertility
  effects of welfare incentives for the US
• Hoynes (1997, JPubE),
• Neal (2004, JHR),
• Rosenzweig (1999, JPE),
• Moffitt (1994, JHR 2000, AER)
• Blau, Kahn and Waldfogel (2004, JHR)
• Mixed results.

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Main Identification Problem

• It is hard to account for unobserved variables
  that may be correlated with both benefit levels
  and with the incidence of single mothers.
• Such as social norms that may vary across
  geographical regions and over time.

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Outline

1. Motivation
2. Previous literature
3. Data and methodology
4. Results
5. Conclusion

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Data and Methodology

• I use data from the European Community Household
  Panel, for 14 countries, with yearly observations
  from 1994 through 2001.
• I define a single mother as an unmarried woman,
  not cohabiting with a partner, who lives with her
  dependent children, at least one younger than 18.
  
• Age cut 18 to 35.

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Sample Size

• I also define single heads as single mothers who
  live by themselves with their children (not in
  co-residence with other relatives).
• The sample includes all women aged 18 to 35.
• Sample size is 172,437.
• The number os single mothers in the sample is
  6,580 (3.8), out of which 4,250 are single heads
  (2.5).

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Econometric Specification

• Logit model for the determinants of single
  motherhood/headship (Y) for a woman i in country
  c and year t.
• X is a vector of individual characteristics (age,
  education).
• Z is a vector of country-specific factors.
• Country and year dummies.

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Benefit Measure

• The measure of benefits includes both social
  assistance payments and family-related
  allowances.
• I measure the generosity of benefits in a given
  country and year as the predicted benefit level
  received by a typical single mother household.

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Welfare Regimes

• Anglo-Saxon countries (UK, Ireland).
• Nordic countries (Denmark, Finland).
• Central-European countries (Austria, Germany,
  France).
• Benelux countries (Belgium, Luxembourg, The
  Netherlands).
• Southern European countries (Greece, Italy,
  Portugal, Spain).

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Benefit Measure (ii)

• I estimate the following regression by country
  for the sample of single mothers
• Then I use the results to impute predicted
  benefits for the typical single mother (with 2
  children, working 20 hours a week)

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Predicted Benefits Received by Single Heads
21
Labor and Marriage Market Controls

• I include two reduced-form controls for labor and
  marriage market conditions at the country level
• Male unemployment rates.
• Adult male (ages 25 to 54) median hourly wage.

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Descriptive Statistics
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Single Heads as a of All Women 18 to 35
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Outline

1. Motivation
2. Previous literature
3. Data and methodology
4. Results
5. Conclusion

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Coefficients Control Variables
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Benefits Coefficients
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Time Effects by Country/Group
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Summary of Results

• In the cross-sectional analysis, we can see that
  the countries with higher benefit levels are also
  those with higher incidence of single mothers.
• Once we introduce year and country dummies, the
  effects become smaller but remain significant in
  some specifications (both for single mothers and
  heads).
• The coefficients imply that a 1,000 euros
  increase in benefits would result in a 2
  increase in the incidence of single mothers.

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Additional Specifications and Robustness Checks

• Different age cuts for women.
• Only for low-educated women.
• Interaction between country and the
  individual-level controls.
• Alternative measurement of benefits.
• Separate regressions for out-of-wedlock
  childbearing and divorce.
• Individual fixed-effects.

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Outline

1. Motivation
2. Previous literature
3. Data and methodology
4. Results
5. Conclusion

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Conclusions

• The paper estimates the effect of benefit levels
  on single motherhood in Europe.
• Using data from the ECHP for 14 countries, for
  the period 1994-2001.
• I estimate reduced-form logit regressions where
  the likelihood of a young woman being a single
  mother (head) is a function of her individual
  characteristics, labor and marriage market
  conditions, and benefit levels.

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Conclusions (ii)

• Country fixed-effects account for unmeasured
  (social, economic) factors at the country level
  that may affect both benefits and the prevalence
  of single mothers.
• Year dummies account for unmeasured factors that
  evolve over time in all countries.
• I also interact the year effects with dummies for
  individual or grouped countries, in order to
  account for changes in unobserved variables at
  the country level that may cause changes in both
  benefits and single motherhood.

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Conclusions (iii)

• I find a positive and significant (but small)
  association between benefits received by single
  mothers and the incidence of these families.
• An increase in benefits of 1,000 euros a year
  would result in about a 2 increase in the
  prevalence of single mothers.
• The results provide some evidence that fertility,
  partnership and co-residence decisions are
  affected by economic incentives.

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Some Caveats

• Better measures of labor and marriage market
  conditions.
• The reduced-form specification limits the
  interpretation of the results.
• Overall generosity vs. targeting of the welfare
  system.
• Different incentives for out-of-wedlock
  childbearing vs. separation or divorce.

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Questions, comments?