does fertility respond to economic incentives? and does it ... · introduction the decline in...
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Does Fertility Respond to Economic Incentives?and does it matter?
David de la Croix
http://www.de-la-croix.beUniv. cath. Louvain (UCL)
Poznan, May 2015
Introduction The decline in fertility Fertility reacts to incentives Does it matter
What does govern fertility behavior?
ex: having kids or not, number of kids, with whom, at which age ...
Two competing views:
Incentives (choice - objective and constraints)
vs
Norms (culture, social pressure, ...)
Giving an answer to this question matters for effectiveness of policy2 / 42
Introduction The decline in fertility Fertility reacts to incentives Does it matter
Demographic Economics
Economic incentives →FertilityMortalityMigration
→ Economic PerformanceGrowth and Inequality
↑ ↓
Migration clearly depends on wages abroad vs wages home
Mortality depends on wealth of people and medical effectiveness
But what about fertility ?
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Map
Facts & Explanations of the secular decline in fertility
Arguments in favor of fertility as reacting to economic incentives
Policy consequences for inequality, fiscal policy, education
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Facts about Fertility
Fact 1: In all species, when resources are more abundant,reproduction increases. This is true for plants,animals, and humans before the industrial revolution.
Fact 2: Before the industrial revolution, the rich had moresurviving children than the poor.
Fact 3: The transition from stagnation to economic growth isaccompanied by a demographic transition from highto low fertility.
Fact 4: Now, both within and across countries, rich andeducated mothers have less children than poor andunskilled ones.
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
The demographic transition
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
The demographic transition in Poland
0
10
20
30
40
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60
1600 1650 1700 1750 1800 1850 1900 1950 2000
CBR Gdansk CDR Gdansk
CBR Russian occupation CDR Russian occupation
CBR Austrian occupation CDR Austrian occupation
CBR Prussian occupation CDR Prussian occupation
CBR Poland CDR Poland
Thanks: Michal Burzynski 7 / 42
Introduction The decline in fertility Fertility reacts to incentives Does it matter
Reasons for the decline in fertility (1)
Demographers would stress:
Contraception: Better contraception technology. But how large isthe gap between desired and effective fertility ?
Mortality: Lower child mortality may imply lower birth, to getthe same number of surviving children(child-replacement hypothesis)
Culture: Change in cultural norms (drops in fertility acrossEurope often followed linguistic and religiouscontours)
Gender: Women emancipation
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Reasons for the decline in fertility (2)
Economists would stress:
Mortality: Same mechanism as demographers
Old-age support: Children as a way to save resources for the futureand to obtain some support when old. Declines withpension systems.
Ban on child labor: Reduces the return from children
Parents’ education: Opportunity cost of child-rearing time is highfor high income/education mothers
Return to education: Industrial revolution accompanied by a rise inthe skill premium (Galor).
Gender empowerment: Together with unequal share of cost ofchildrearing
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Best Explanation difficult to identify. ex: US
1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000
No
rmal
ize
d in
dex
es
Years
Inverse of total fertility rate (white)
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Best Explanation difficult to identify
1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000
No
rmal
ize
d in
dex
es
Years
Inverse of total fertility rate (white)
Gross domestic product per capita
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Best Explanation difficult to identify
1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000
No
rmal
ize
d in
dex
es
Years
Inverse of total fertility rate (white)
Gross domestic product per capita
Average years of education per person employed
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Best Explanation difficult to identify
1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000
No
rmal
ize
d in
dex
es
Years
Inverse of total fertility rate (white)
Gross domestic product per capita
Average years of education per person employed
Infant survival rate (white)
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Best Explanation difficult to identify
1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000
No
rmal
ize
d in
dex
es
Years
Inverse of total fertility rate (white)
Gross domestic product per capita
Average years of education per person employed
Infant survival rate (white)
Contraception effectiveness (annual success rate)
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Quality - Quantity Tradeoff Model
Most economic models are based on the QQ model
In the budget constraint:Total cost of children = number × spending on quality(education+health)
When number of children (quantity) becomes too costly, or ifquality becomes more profitableparents may want to invest more in the quality of a small numberof children. Becker.
Also across species in natural world (elephant vs invertebrates).
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Baby elephant vs tadpoles
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
QQ tradeoff
Education spending per child (in logs) vs # children per parent
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Differential fertility
QQ account for fertility over time in the demographic transition,but also for fertility rates in the cross-section of a given country.
Since for educated women the opportunity cost of child-rearingtime is high, they prefer to invest in the “quality” of a smallnumber of children.
For less educated women, the opportunity cost of raisingchildren is low, while providing education is expensive relative totheir income. They would therefore prefer to have many children,but invest little in the education of each child.
Look at fertility by education level of parents may help to identifythe important determinants of fertility
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Differential fertility in Poland
from Zuzanna Brzozowska (2013)
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
The decline in fertility together with differential fertility inthe US
from Jones and Tertilt (2007)
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Interaction between Gender Power and ChildRearing Costs
Assumption:
If fertility results from a bargaining within the family
it will depend on
• women’s rights (important for outside option - case ofdisagreement)
• women’s education (opportunity cost of childrearing increases)
• sharing the tasks within the household
If women are educated but task sharing remains very unequal,they will disagree to have many children
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Do people really choose their number of children ??
Surveys
Common Sense
History
Childlessness
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
1. Surveys
1. Surveys (Pritchett 1994)
Ninety percent of the differences across countries in total fertilityrates are accounted for solely by differences in women’s reporteddesired fertility.
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
% women with unwanted birth (Baudin, de la Croix,Gobbi, 2015)
Built from Demographic & Health Survey - married womenAssumption: a woman does not control her fertility if:
• (completed fertility − ideal fertility) > 1• she believes husband did not want more children than her
0
0.15
0.3
0.45
0.6
0 4 8 12 16
pro
bab
ility
of
no
t co
ntr
olli
ng
fert
ility
years of schooling
Rwanda
Senegal
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
2. Common sense
Having one more child is a huge investment
Similar in cost to buying a small house (Cigno)25 / 42
Introduction The decline in fertility Fertility reacts to incentives Does it matter
Good cost + time cost
Cumulative hours of child care that the wife devotes: (from timeuse survey, USA)1 kid family: 9.2742 kids family: 12.9463 kids family: 18.389
+ Husbands time
From Cordoba - Ripoll (2015):
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
3. Historical data
Look at forerunners in fertility decline
Fertility started to decline in some European cities as early as inthe 18th century
Because some incentives changed in cities?
Historical data - Rouen (Bardet)notables merchants craftsmen workmen
Fertility per women1670-99 6.23 6.53 7.19 7.211700-29 4.87 5.51 6.29 6.061730-59 4.84 4.81 5.48 5.671760-92 3.77 3.28 4.84 4.84
Similar trends in Geneva (1670-1820)
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
4. Childlessness
There is a risk for a couple to be sterile - between 2% and 4%
Observed % of childless couples is usually above this level.
On recent data, the childlessness rate increases sharply witheducation of the mother
Makes sense as opportunity cost of kids increase with education
Part of it is also delayed fertility (for economic reasons) ending insterility
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Childlessness in the US, Census 1990, women aged 45+
from Baudin, de la Croix, Gobbi, AER, 2015:
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
0.2
0.4
0.5
0.6
0.7
0.8
0.9
1
1 2 3 4 5 6 7 8 9 10 11 12
singles
married
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Does it matter if fertility depends on incentives?
Policy implications:
• for inequality
• for public vs private education
• for population races
• for pro-natalist or anti-natalist policy
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Inequality
Inequality is usually found bad for growth
Many channels are invoked: political economy, sociopoliticalunrest, borrowing constraints...
One neglected channel: differential fertility
We show it is an important one
If inequality increases, rich are richer, have fewer highly educatedchildrenpoor are poorer, still have many uneducated childrenaverage human capital decreases in the future
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Initial effect of inequality
Endogenous Fertility Exogenous Fertilityσ2 g0 N0 I0 D0 g0 N0 I0 D0
0.10 2.00% 0.00% 0.056 0.09 2.00% 0% 0.056 00.75 1.26% 0.66% 0.404 1.95 1.87% 0% 0.400 01.00 0.80% 1.08% 0.520 2.76 1.78% 0% 0.513 01.50 0.01% 1.71% 0.707 2.77 1.53% 0% 0.700 0
I0: initial Gini on earnings. D0: initial fertility differential
from De la Croix and Doepke, AER 2003
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Inequality and Growth
0.2 0.4 0.6 0.8Gini
-0.005
0.005
0.010
0.015
0.020
Growth
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Education policy
Literature with exo fertility says public schooling is bad for growth
With endo fertility:
Fertility differentials between rich and poor are bad for growth
They are related to private investment in quality
It may disappear with (free) public schooling
That can be good for growth.
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
PISA for Brazil and S. Korea
Country social % in priv. fertilitystatus schools
Brazil 16-35 2.35% 3.6736-53 10.59% 3.3654-70 23.00% 3.0771-90 49.60% 2.86
S. Korea 16-35 47.23% 2.4636-53 50.00% 2.2554-70 49.69% 2.1871-90 45.83% 2.20
A more egalitarian education system (or society) lowers fertilitydifferentials between rich and poor
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Additional effect of public education
Differential fertility → centrifugal force: higher reproduction bylow-skilled people increase the relative number of the poor. Publiceducation offsets this centrifugal force.
Same argument could be applied in deeply divided countries(because of different ethnic groups, religions,...)
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Conclusion about Public Education
1. Public schooling distorts the fertility and education choice ofparents: parents increase fertility once education is provided forfree.
This leads to lower growth in the long-run.
2. When there is inequality, the comparison of growth rates canswitch in favor of public education, because of differential fertility.
3. With private education, differential-fertility can result in adiverging income distribution. This divergence can be prevented bya public education.
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Fertility as a strategic variable
Suppose a deeply divided society, e.g. by ethnic groups.
Political power is often strongly increasing in the size of the group.
This provides incentives to have a high fertility norm, for the nextgeneration to regain power.
Example of Easter Island - population race between clans -environmental collapse.
Current examples: Palestinians - Orthodox Jewish.Extensions: Education race - Cast system in India.
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Population policy: pro- vs anti-natalism
[Sweet Achievement]
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Glory to the Mother Hero-ine!
Your country needs your heroicachievements
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Pro-natalist policy often combines incentives with norms
Putin’s policy:
Incentives: Child benefits, longer maternity leaves, etc...
Norms: Dubbing mothers with large families “Hero Mothers” (+medals)
Unclassifiable: Day of conception on Sept 12, with work stoppingat noon to encourage people to copulate
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Introduction The decline in fertility Fertility reacts to incentives Does it matter
Conclusion
Population policy can be effective, like the Chinese one child policybut accompanied / accelerated an inevitable transition
Can it be strong enough to reverse cultural or economic trends ?e.g. if men still do no participate in child rearing (Russia?)
Lesson from today:Pro-natalist policy may backfire on quality of childrenMay be ineffective in the face of gender imbalance within couples
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