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We argue that fertility trends in advanced societies are in part driven by differences in trust. The argument builds around the idea that trust implies individuals and couples being willing to outsource traditional family activities to other individuals outside their own family. Trust is therefore seen as a catalyser for the process of increased female labour force participation, the diffusion of childcare facilities, and hence a halt to the continuing fertility decline. Support of this hypothesis is drawn from the World Values Survey and European Values Survey. We present evidence both from country-level regressions and from a series of multilevel analyses. We find that trust by itself is positively associated with fertility over recent decades. Moreover, trust interacts with women’s education. In particular, as higher education for women has expanded, which traditionally is seen as a robust predictor for lower fertility, trust is a precondition for achieving higher fertility among those women with very high education.

We study the joint design of nonlinear income and education taxes when the government pursues redistributive objectives. A key feature of our setup is that the ability type of an agent can affect both the costs and benefits of acquiring education. Market remuneration of agents depends on both their innate ability type and their educational choices. Our focus is on the properties of constrained efficient allocations when educational choices are publicly observable at the individual level, but earned income is subject to misreporting. We find that income-misreporting (IM) affects the optimal distortions on income and education and shed light on the reasons for it and mechanisms through which it is done. We show how and why IM strengthens the case for downward distorting the educational choices of low-ability agents. Finally, we find that IM provides another mechanism that makes commodity taxation useful.