The Poorhouse is a big lover of pop-economics, the sort of stuff famously published in tomes such as The Undercover Economist or Freakonomics. The quantitative inter-relation of sometimes disparate-seeming topics, but mostly concentrating on cold hard money, is a fascinating insight into how the world really works. The more popularised writings on such topics may be a little dumbed down for the masses, but on the other hand they are actually interesting to read.

Nonetheless, there are some activities that at first it is hard to see that they would innately relate to financial incentives such as taxation in a consumer-driven way. The truly mortal stuff, births and deaths, one can see easily would relate strongly to wealth - if you have the money for good medical care, you'll likely live longer - but at the end of the day generally people don't have a lot of active choice over exactly which day they are born or die in a way that they can choose their brand of cola...or do they? Work by Joshua Gans and Andrew Leigh indicates maybe there are more active - financially incentivisable - choices going on that one might expect.

Starting with births, they use as their case study a time period where the Australian Government decided to financially reward mothers for having a baby with a simple reasonably high lump sum of $3000. This was announced publicly on May 11th 2004, and the rewards actually started being handed out to parents from July 1st 2004 (note that this is only a couple of months after announcement - no time for a gaggle of wannabe mothers to impregnate themselves ready to drop on July 1st!). So to sum up, if you were pregnant on the 11th May, you would get a decent sized financial reward if you gave birth on or after July 1st, but none if it was June 30th or before. But hey, what's done is done, you don't control when you're going give birth after all, do you?

Well, it seems you can. Check this chart from their paper, particularly panel B, showing the relative number of births compared to the expected numbers from previous year's experience.

Yes, towards the end of June there were far fewer babies born than expected, but from July 1st onwards there was a sudden extra burst, as though mothers were somehow keeping their child unborn until the time at which it became most profitable to give birth.

In fact, this is basically likely what happened. Giving birth isn't as random as innocents like the Poorhouse figured. A high amount of people have Cesarean sections or induced births, where some level of deliberate human agency is clearly involved. Although there was something of a limited effect on standard "natural" births, it wasn't greatly significant. The inducements and c-sections showed by far the strongest significant effect. So OK, it's not some strange natural effect coming in to play, it's people deciding when the right time to give birth - normally a medical decision - is, based on how much money they will get for it - an economic decision.

Medical and economic decisions do not always mix well: see areas of the world where healthcare is privatised for many an example. It's also known that birthing babies too early or too late is dangerous to their well-being. Given that the researchers saw that it appeared that fully a quarter of births that would normally be expected to happen in June were delayed for at least 2 weeks. That coupled with the fact that presumably doctors and nurses were run off their feet with super-busyness at the start of July and hence perhaps not able to give the same levels of care and attention to each parent is worrying the Poorhouse that there could feasibly be serious implications for many a kid.

Policy-makers, given human nature isn't so easy to change, learn from this!

So that's births, where there does seem to be some human agency involved. Deaths though, surely one can't choose to change the date they're going to die for financial reasons, aside from those contemplating murder or suicide?! Well, check another study from the same authors.

Back to Australian economic policy we go. Inheritance taxes - a sum of money you has to pay based on their wealth and estate at the time of death, and hence impacting what gets passed on to your loved ones or other deserving recipients - were quite high prior to 1979 as long as your estate was worth over a set amount (most people's wasn't). In 1979, they were totally abolished for everyone.

Again, like with the birthing policy above, there was a definite cut-off point. If you died before July 1979 your assets would be heavily taxed; but if you died on or after July 1979 then no tax would be levied.

What happened? Well, check the below. Given what we read above, you won't be immensely surprised.

Just before the cut-off date for the abolishment of inheritance tax, death rates dropped, only to peak again right afterwards. People seemed to be deliberately delaying dying until it was cheaper to do so, and yes, in a statistically significant - if small - way. Their estimate is that approximately 5% of people managed to shift their deaths from the last week of where their descendants would have to pay inheritance tax, to the week where they wouldn't. It doesn't sound a lot, but it did prove statistically significant, and one has to bear in mind that only 9% of deaths would have been eligible to pay inheritance tax in the first place.

Now, there are plenty of holes in the study, mostly due to the lack of detail in the data they could acquire. We don't know if the effect is due to actual deaths, or a conspiracy of misreporting of deaths. We don't know if the 5% of people who seemed to delay their deaths were in the 9% that would have had to pay inheritance tax or not. Although seasonality was somewhat controlled for, we don't know if there was a freak heatwave in the first week of July that killed an unusually high number of people off, and so on.

Nonetheless it is an interesting and bizarre phenomenen. As the authors note, a further test might come soon in that the US legislated to abolish some inheritance taxes at the start of 2010. Will we see more Americans than usual surviving the preceding festive period, only to die in a big peak starting January 1st?

References:

Born on the first of July: An (un)natural experiment in birth timing

Did the Death of Australian Inheritance Taxes Affect Deaths?