The Biased Reaction to Changes in Family‐Related Public Expenditure: How Generosity and Universalism Relate to Fertility

Abstract This study examines the relationship between fertility and social policies across countries within the European Union. Using European Union Statistics on Income and Living Conditions (EU‐SILC) data from 2005 to 2020, the research investigates how increases and reductions in family allowances are connected to the likelihood of subsequent births in the short term. Based on the social investment hypothesis and a general expansion of family policies in the European Union since 2005, we investigate if and how increased family support contributes to birth events within families. The novel contribution of the analysis is to assess asymmetric fertility reactions to changes in family‐related social benefits. We present the first comparative study that not only analyses expansive policy changes but also retrenchments. Specifically, we look at changes in benefit generosity and universalism from one year to another. Findings indicate that enhancing the generosity of cash benefits is positively related to an increase in the likelihood of having a child. However, reductions in generosity are associated with larger declines in fertility responses, highlighting a negativity bias. In contrast, changes in universalism exhibit more symmetric behavioral responses, with expansions and retrenchments linked to comparable effect sizes regarding subsequent births. Similarly, the combined indicator of generosity and universalism reveals balanced associations in both directions.