This project consists of research on macro models of fertility and household formation. The first part involves research on household formation. Secondly, fertility as a specific dimension of household size is analyzed. Finally, a normative framework for examining fertility decisions is developed.
The objective of the proposed research is to take a further step at combining family economics with traditional macroeconomics. In particular, the research seeks a better understanding of the following issues: 1. Why are people today living in smaller households than they did 150 years ago? Is this a cause for concern or an efficient response to growing incomes? 2. Are results in the literature arguing that household size can explain several patterns in the data (e.g. the life-cycle hump in consumption) robust to treating household size as an endogenous variable? 3. Do marriage institutions (e.g. polygyny) have aggregate effects? 4. What is the relationship between income and fertility? And is this relationship stable over time? 5. Is fertility too high in Africa and too low in Germany? To answer the questions posed above, the researcher will rely on the tools of modern macroeconomics and build quantitative models of fertility and household-size choice. Household formation, and in particular fertility, is an intertemporal decision, and hence the methodology of modern dynamic general equilibrium theory is a natural tool to study these topics. Using a general equilibrium model to study questions that are traditionally addressed by labor economists allows the investigation of feedback effects. For example, fertility decisions affect future aggregate labor supply and therefore, therefore, both the capital labor ratio and wages. The future wage - a measure of the expected well-being of the children - might in turn affect the incentives to have children.
To study these models quantitatively, the proposed research employs data from a variety of sources. The main two micro data sets used are the Consumer Expenditure Survey (CEX) and the U.S. Census data. The CEX is an excellent source of detailed consumer spending data in the United States. The data will be used to calibrate a quantitative model of endogenous household size where a key benefit of living together is household-specific public goods (e.g. shelter). The CEX is available at no cost through the Stanford library. The Census data employed will be the 1850-2000 integrated public use microdata series (IPUMS) made available for free by the Minnesota Population Center. The integration provided through IPUMS makes the data comparable across years, which is desirable in a study of household changes over the centuries. Moreover, the researcher has extensive experience with this data set because she has worked at the Minnesota Population Center as a research assistant from June 2001 through September 2002. The Census data will be used to study changes in fertility rates and household size and composition over the last 150 years. The project is especially interested in how fertility relates to various measures of income, and whether this relationship has changed.
Broader Impacts: To contribute to the optimal population debate, a theoretical "toolbox" is developed to analyze normative fertility issues. Two alternative generalizations of the notion of Pareto efficiency that apply to circumstances when fertility is endogenous are proposed. The researcher explores the theoretical properties of these concepts and employs them to shed light on the population debate. This work on efficient population growth provides an important tool for the policy debate on fertility and the optimal population growth rate.
