Research Programme


 

Fertility and the distribution of income and wealth

Alice Schoonbroodt, Xavier Mateos-Planas

Project summary

Objectives

The general aim of this project was to investigate fertility choices within and across groups of households. The specific objectives were twofold. The first was to identify the determinants of observed fertility. These included factors related to the economy such as productivity growth and fluctuations, wages, wealth, uncertainty and financial markets. Other factors were related to policies (parental leave; child benefits; child care; pensions) and society (female labour force participation; education; family composition). The second objective was to use this understanding to make inferences for future fertility choices and their economic impact.

Methods

Motivated by statistical economic analyses, a rational choice approach was adopted to develop a macro-economic choice model of fertility in a growing economy. This was to address both the long run trends (1850-2005) and fluctuations (e.g. 1930s accelerated decline, 1960s baby boom, 1970s bust) and possibly more recent fluctuations. These models extended classic dynamic economic models of Becker and Barro (1988), where parental altruism (i.e. parents derive utility from the number of children and their utility) motivates intergenerational transfers through capital accumulation and fertility choices.

Following Mateos-Planas (2002) the model questioned Becker’s original assumptions regarding the substitutability of the parent’s consumption and the children’s wellbeing. The models were then extended to incorporate educational choices, crosssectional disparities across households and a more realistic age structure (e.g. modelling youth, middle age and retirement more precisely). 

Findings

Although there is overwhelming empirical evidence that fertility is negatively related to income in most countries at most times, the study has found that these theories are not as robust as is commonly believed. That is, several special assumptions are needed to generate the negative relationship. Not all assumptions are equally plausible. Such findings will be useful to distinguish alternative theories, and the research team have recommended further research in this area.

The research has also shown that under reasonable parameter values, fertility is pro-cyclical and that, following a shock, fertility continues to cycle from within as subsequent cohorts enter retirement.

The research also sheds new light on Barro-Becker type preferences – this study has shown conversely that when family size and utility of offspring are ‘substitutes’, there is a strong force to decrease fertility when conditions improve. Increases in productivity growth rates cause population growth rates and birth rates to fall substantially, however fertility also falls when productivity is low.

The research has demonstrated that government transfers need to be tied to a person’s fertility choice in order to provide incentives for child bearing, thus providing a justification for pronatalist policies.

 

Publications

Jones, L. and Schoonbroodt, A. (2010) Complements versus Substitutes and Trends in Fertility Choice in Dynastic Models, International Economic Review, 51,(3), 671-699.

Jones, L., Schoonbroodt, A and Tertilt, M. (2011) Fertility theories: can they explain the negative fertility-income relationship? In, Shoven, J.B. (ed.) Demography and the Economy (National Bureau of Economic Research Conference Report). Chicago Ridge, US, University of Chicago Press, 43-100.

 

Media activities

You can browse all CPC media outputs and population-related articles from CPC members on our Scoop.it! page.