A bundle of joy or an expensive luxury : a comparative analysis of the economic environment for family formation in Western Europe

This report provides a description of the diversity of current policies towards the family across the European Union and an account of the current"state of the art"on the effects of these policies on demographic and labor market behavior. There is an implicit assumption that the tax and benefit system (and any change to it) is somehow gender- and family-neutral and that the gender relations do not affect family formation. This paper's main aim is to fill this gap by exploring the extent to which the course of demographic trends within a country depends on State policies towards the family and its commitment to gender equality. The starting point of the analysis is the rather puzzling finding that in the 1990s amongst the European Union, the countries with the highest fertility rates are not those where the tradition of large families is longstanding, relations are stable, women's participation in the labor market is low, and the tax system is based on a"strong breadwinner"model. On the contrary, fertility is highest in Scandinavia where marriage is a rare and fragile institution and women have a relatively strong attachment to the labor market. Our cross-country comparison points to two crucial factors: the relatively low cost of childbearing and the more equal division of labor within the household.