Do unconditional cash transfers increase fertility? Lessons from a large-scale program

We examine the impact of unconditional cash transfers (UCTs) on fertility. We develop a theoretical model that demonstrates how UCTs financed by labor income taxation affect parents’ decisions regarding work time, fertility, and child human capital development through education spending. We then empirically examine the impact of UCTs on fertility in Pakistan. Our theoretical model suggests that UCTs are likely to increase or decrease fertility depending on whether the income effect or the substitution effect of cash transfers is stronger. The empirical results suggest that UCTs have a positive effect on fertility but a negative effect on birth spacing.<br>