A new method of identifying target groups for pronatalist policy applied to Australia.

A country's total fertility rate (TFR) depends on many factors. Attributing changes in TFR to changes of policy is difficult, as they could easily be correlated with changes in the unmeasured drivers of TFR. A case in point is Australia where both pronatalist effort and TFR increased in lock step from 2001 to 2008 and then decreased. The global financial crisis or other unobserved confounders might explain both the reducing TFR and pronatalist incentives after 2008. Therefore, it is difficult to estimate causal effects of policy using econometric techniques. The aim of this study is to instead look at the structure of the population to identify which subgroups most influence TFR. Specifically, we build a stochastic model relating TFR to the fertility rates of various subgroups and calculate elasticity of TFR with respect to each rate. For each subgroup, the ratio of its elasticity to its group size is used to evaluate the subgroup's potential cost effectiveness as a pronatalist target. In addition, we measure the historical stability of group fertility rates, which measures propensity to change. Groups with a high effectiveness ratio and also high propensity to change are natural policy targets. We applied this new method to Australian data on fertility rates broken down by parity, age and marital status. The results show that targeting parity 3+ is more cost-effective than lower parities. This study contributes to the literature on pronatalist policies by investigating the targeting of policies, and generates important implications for formulating cost-effective policies.