This paper studies the effect of financial incentives on fertility decisions, based on the 2011 Family Tax Break reform in Hungary which introduced a major overhaul with a disproportionately large increment at the third child. I build a unique, family-level linked dataset from the 2016 Microcensus and the 2011 Census of Hungary, providing a rich set of individual parental pre-policy control variables, and observe the change in the number of children within families, their labor market status, and other relevant outcomes. To identify the effect, I use variation along cohorts (before and after the end of fecundity), initial number of children in 2011, and prospective household income in 2011, and argue that the policy induced a quasi-experiment along these dimensions, enabling the identification of the conditional average treatment effect on the treated.
The estimates suggest that at the third or higher birth parities the policy change resulted in an around 1\% higher completed fertility, while a different specification for lower birth parities points to no robust effects. The effects seem to be heterogeneous, being more prominent for religious, more educated, married, and higher income families.