This study examines the effect of economic conditions on marital fertility, as measured by parity progression and shifts in the timing of conception in first and higher order birth intervals, during the U.S. post-war period. Our primary aim is to implement both the Easterlin relative income and the New Home Economics models in a unified framework using micro level data. Within this framework, we will test the relative strength of the income and substitution effects of the wife's wage and labor supply, in order to determine whether fertility responds pro- or counter-cyclically. In addition, we will test the relative income hypothesis using micro data on (his/her parents' income as proxies for the couple's material aspirations. We will examine effects on both parity progression and the hazard of conception in each birth interval. The questions addressed lie at the very heart of scientific debate among the major economic models of fertility. How responsive are couples to aggregate economic conditions and to their own economic circumstances and experiences? Are these responses to labor market conditions pro- or counter-cyclical? Do these responses represent permanent effects or simply postponement of childbearing to a more opportune time? Do micro level differences in income (perhaps relative to parental income), elicit the same fertility response as do aggregate changes in cohort relative income (observed in long time series)? The primary innovations in this research will include: (1) the use of micro-level data in an analysis of fertility response to economic fluctuations; (2) the use of a multiple-episode proportional hazards model incorporating both time-varying covariates and couple heterogeneity; (3) modelling of the effect of time-varying aggregate and individual economic variables, as well as relative income measures, on a couple's parity progression; (4) the use of date of conception, rather than birth, in order to associate with fertility the economic conditions which actually pertained at the time of the fertility decision; (5) the examination of the fertility response to successively more aggregative indicators of economic activity; and (6) the incorporation of relative income measures into this type of micro-level hazard framework.
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