Born on the First of July
Joshua Gans & Andrew Leigh
Bringing down the 2004 budget on 11 May, Treasurer Peter Costello said he hopedevery Australian family would have three children – one for the husband, one for thewife, and one for the country. To show he was willing to put his money where hismouth was, the Treasurer announced a new simplified “Baby Bonus.” Unlike the oldpayment, which had been complex to calculate and understand, this one could not besimpler: for every new baby, the mother would get $3000.There was a small catch. As with most budget announcements, this one did not takeeffect until the start of the financial year. Only babies born on or after 1 July 2004qualified for the Baby Bonus. That means that parents who had babies in theintervening period would not receive the new Baby Bonus.What the government may not have fully anticipated is how expectant parentsresponded to these new incentives. These days there is some discretion as to theprecise day you have a child. With planned caesareans and inducements, manyparents really do get to pick junior’s birthday. If your baby was due in late-May andearly June, this wouldn’t really matter. But what about if your child was due at theend of June?To test the effect, we obtained three decades of daily births data from the AustralianBureau of Statistics. Since the mid-1970s, the population has grown, but the birthratehas declined, so the number of births per year has stayed pretty constant.Across the last 10,000 days, one stands out. On 1 July 2004, more babies were bornthan on any other day in the past thirty years. The day on which the new Baby Bonustook effect might well be called “the Great Australian Birthday.”Remember, the new Baby Bonus was only announced in May 2004, so it could nothave affected conceptions. So the only way it could have had an impact was if parentschose to “move” their child’s birthday from June to July.Using daily data from the Australian Institute of Health and Welfare on caesareansections and inducements, we find that the rate of both procedures increased sharplyin July 2004. Not surprisingly, the effect is largest in the final week of June and thefirst week of July. We estimate that about 700 births were moved by two weeks orless.But some babies were moved further still. According to our results, the Baby Bonuscaused the birth dates of about 300 babies across the country to be moved by morethan two weeks. This appears to be troubling; although it may also indicate theconsiderable latitude that exists around the scheduling of these procedures.Regardless, the impact of the 2004 Baby Bonus was considerable disruption forhospitals and expectant mothers that continued through July. Thus, maternity wardswould have been placed under considerable stress for essentially a non-medical event.Whether this disruption was worth the government saving about $100 million inpayouts is not clear. A comprehensive study on the health effects is yet to be done.