WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

Family policy spending has been linked to a wide range of macroeconomic, sociocultural, and political factors in the social policy, family policy, demography, and political science literatures. This paper examines the influence of these factors on child benefits in the context of population aging. More specifically, it explores the impact of five macroeconomic factors, three sociocultural factors related to immigration, and three political (f)actors on child benefit size and design in 26 European countries between 2002 and 2021. Child benefit size is operationalised in cumulative terms as well as in terms of variation by birth order (from first to fourth children) and household income (middle- and low-income). The analysis is conducted through pooled time series regressions with country-fixed effects and panel-corrected standard errors, using data from a wide range of international sources.

The paper finds that all three types of factors tested are linked to child benefit size, although whether and to what extent they matter varies by birth order and household income. The most consistently (negatively) associated factor is immigration stock. In some of the models, child benefit size is also associated with inflation (negatively), GDP (positively), pro-immigration attitudes (positively), and right-wing party strength (positively and negatively, depending on household income). Moreover, the difference in benefit size between middle- and low-income households is higher when unemployment is higher. These findings reinforce the scholarly consensus around child benefits as a multi-layered policy instrument whose size is facilitated and constrained by a complex interplay of macroeconomic, sociocultural, and political factors.