Parents are people too
One of the Ten Principles of Economics is that "People Respond to Incentives." On this father's day, here is a story to remind us that this principle applies to would-be parents.
As Joshua Gans tells it, in May 2004, the Australian government announced that it would give a $3000 maternity allowance for babies born on or after July 1, 2004. So what happened?
No surprise: a decline in births just before the cutoff and a surge in births just afterward. Economists call this intertemporal substitution. Gans reports:
FYI, Gans is one of my coauthors for the Pacific Rim adaptation of my introductory text.
As Joshua Gans tells it, in May 2004, the Australian government announced that it would give a $3000 maternity allowance for babies born on or after July 1, 2004. So what happened?
No surprise: a decline in births just before the cutoff and a surge in births just afterward. Economists call this intertemporal substitution. Gans reports:
Indeed, the 1st July, 2004, had the most number of births in a single day over the entire 30 years of data we had (almost 11,000 days). The 2nd July was no slouch either, being the 7th highest day. This was a big effect.The lesson: Always remember the Ten Principles.
FYI, Gans is one of my coauthors for the Pacific Rim adaptation of my introductory text.
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