Fertility Effects of Aggregate Unemployment
Christian SchmittSocio-Economic Panel Study (SOEP)
2006 Conference of the European Panel Users Network
Universidad Pompeu Fabra de Barcelona, 8-9 May 2006
Overview
(1) Low Fertility in Europe - Brief Introduction
(2) Research Topic and Previous Findings
(3) Theoretical Foundations
(4) European Labour Markets during the 90ies
(5) Data and Methods
(6) Findings and Conclusion
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Background I
– Below replacement levels of fertility among most western European countries
Source: European Communities 2003
1,47
1,981,74 1,73 1,7 1,69 1,65 1,63 1,57
1,421,29 1,29 1,29 1,25 1,24
1,9
0
1
2
EU IRL F DK FIN L NL B UK S P D EL A E I
Figure 1: Total fertility rate (TRF) in EU countries 2001
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Background II
Potential causes:
1) Increasing female labour-force participation
2) Acquisition of economic resources prior to family formation (also linked to labour-force participation)
• Result: Strong integration into the labour force vs. time needed for family formation.
• Time as a scarce resource
in a situational as well as in a
Life-course related sense
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Background III
Difficulties in combining career and family roles, especially for women
Conclusion:
High opportunity costs of parenthood
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Research Topic
• Second part of a research project dealing with fertility effects of unemployment
• Part one: Effects of inidivdual unemployment • Findings in brief (lowered opportunity costs vs. reduced
economic backing
• Part two: Effects of aggregate unemployment
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Research Topic and Previous Findings
• Unemployment rate as economic predictor of future labour market opportunities & prospects
• Previous research based mainly on macro level models of economic indicators affecting fertilty
Unemployment Rate, Average earnings, GNP
as predictor of TFR
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Research Topic and Previous Findings
Disagreement in previous reserach: Pro-cyclical effects:• Wilkinson 1973, Macunovich&Easterlin (1988),
Macunovich (1995), etc.
Vs. Countercyclical effects:• Butz & Ward (1979) (=> Relation to female earnings and
reference to the New Home Economics)
• Major Problem: Derivations of aggregate data without understanding of the underlying effects and correlations on the micro level
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Theoretical assumptions I
Theory of Action
• Maximisation of the utility under limited resources
• Given constraints and preferences• Gender specific structuring of resources and
constraints New home Economics (esp. Becker 1981, 1993)• Gender specific division of labour between
household and market work with the woman specialising in household work in most cases
Brown Bag
Theoretical assumptions II
Rational Choice and the Life-Course-Perspective
• Preferences and expected utility are affected by life course transitions and trajectories
Social Change affecting the Life-Course: Educational Expansion and the role of human capital investments
Example: women may reject the role of the sole homemaker and work full time in order to avoid human capital depreciation
Brown Bag
Institutions as Tie between Life-course an Rational Choice
• Welfare-state institutions structuring the life-course (Mayer 1990)
• Institutions structuring (expected) utility
• Imminent rationality vs. life-course dependent rationality
Rational-Choice core (example: discount assumption) vs. life course rationality
Family formation as rational choice, given a causal development of the life course (appearing as irrationality)
Theoretical assumptions III
Brown Bag
High unemployment rate:
Increase in labour market related uncertainties, decrease or staqnation in earnings potential
Coping strategies for this situation?
1)Improvement of labour market position to prepare for expected risks delay in family formation
2) Family formation as alternative pathway temporary labour market exit as coping strategy Gender specific differentiation (childbearing and childbirth
affecting “female” time resources only) and Cultural differentiation (different childcare cultures [family vs.
public care] and different supply of childcare institutions; different family support of social policies)
Theoretical assumptions IV
Brown Bag
Individual fertility decision structured by (aggregate
level) information, predicting economic perspectives
Three major questions:1) Which information is used by the individual ?2) How does the information (of high unemployment, e.g.)
affect individual decisions?
Decision making under uncertainty and
Effects of Risk Aversion
3) How does the individual interprete the information
Different threat potential of high unemployment rates in
partial labour markets
Theoretical assumptions III
Brown Bag
Welfare state typology as frame of reference
• Cross national comparison based on Esping Andersen‘s typology of welfare regimes (1990)
• Countries included in the analysis:
• United Kingdom (anglo-american liberal)• Germany (continental conservative)• France (continental conservative)• Finland (scandinavian social-democratic)
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Evidence from the macro level
Source: OECD (2004)
Note: All values in percentage points
Figure 2: Unemployment Rate in EU Countries
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0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
EU15 D F Fin UK
Evidence from the macro level
Figure 3: Gender Unemployment Gap
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-6,0
-4,0
-2,0
0,0
2,0
4,0
6,0
1993 1995 1997 1999 2001
EU15 D F Fin UK
Source: OECD (2004)
Note: All values in percentage points
Evidence from the macro level
Figure 4: Total Fertility Rate
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0,0
0,5
1,0
1,5
2,0
1993 1994 1995 1996 1997 1998 1999 2000 2001
Germany France Finland UK
Source: Eurostat (2006)
Note: All values refer to TFR-Indicator
Social policy settings I – Family related benefits
• France and Finland: Encouragement of the combination of family and occupational attainment(paternity leave, extensive childcare system)
• Germany: Encouragement of women to retreat from the labour market (lasting childrearing leave, low coverage of childcare institutions)
• UK: Dual pressure: Limited financial aid and high cost of widely privatised childcare system
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Social policy settings II – Unemployment related benefits
Unemployment insurance:• Finland: Tolerant rules of entitlement, high payments,
increased payment for parents, 23 months• Germany: High payments, increased payments for
parents, 4 to 32 months• France: Payment 4 to 60 months, below 60% of last
net income• UK: Low flat rate for 6 months
Transfers are ceased in the UK after 6 months, in D, Fin and F subsequent unemployment assistance
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Design of the multivariate analysis
• Application of event history methods
• Piecewise-constant exponential hazard model
• Time variant (measured in months) and invariant
covariates:
h(t) = exp(t) exp(x + zt)
• Process time starts with 16th year of life (month 192,
population at risk: 16-44 years of age)
Brown Bag
Data and Methodology I
• Consideration of Transitions to first birth is
considered (family formation)
• Month of fertilty decision as relevant event (to
account for a causality)
• Utilisation of ECHP-data from 1994 to 2001
• Separate estimates by country and gender
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0.00
0.25
0.75
1.00
Sur
viva
l
10 15 20 25 30 35 40 45Age in years
Fran ce Germany
Finla nd United Kingdom
Data and Methodology II
EPUNet 2006Source: ECHP 1994 - 2001, own calculations n = 5.668
Figure 5: Transition to first-parenthood – Kaplan-Meier survival estimates
0.00
0.25
0.75
1.00
Sur
viva
l
10 15 20 25 30 35 40 45Age in years
Fran ce Germany
Finla nd United Kingdom
Data and Methodology II
Figure 5: Transition to first-parenthood – Kaplan-Meier survival estimates
EPUNet 2006Source: ECHP 1994 - 2001, own calculations n = 7.341
0.00
0.25
0.75
1.00
Sur
viva
l
10 15 20 25 30 35 40 45Age in years
Fran ce Germany
Finla nd United Kingdom
Data and Methodology II
EPUNet 2006Source: ECHP 1994 - 2001, own calculations n = 9.865
Figure 5: Transition to first-parenthood – Kaplan-Meier survival estimates
Data and Methodology II
Aggregate Information on:
• GNP,
• Annual unemployment (NUTS0)
• Regional annual unemployment rate (NUTS1)
• Gender specific unemployment rate (NUTS1)
• Age specific unemployment rate (NUTS1)
• Individual activity status (incl. individual UE and duration)
• Information on previous long-term unemployment
• Individual and partners income and benefits and transfers• Information on education, relationship, housing, origin, etc.
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France Finland Germany United Kingdom
Aggregate Indicator
Male Female Male Female Male Female Male Female
GNP 1.019 0.927* 1.047 1.056 0.865*** 0.891*** 0.933 1.020 Hazard Ratio
Nuts0 0.910* 0.993 1.124*** 1.166*** 1.013 1.004 1.035 1.014
Nuts1 0.976 1.000 1.030 1.071*** 0.961* 0.945*** 0.977 0.990
Nuts1 - by Gender
0.969 0.999 1.032 1.065*** 0.949** 0.965** 0.982 0.976
Nuts1 - by Age
0.962*** 0.988* 1.018 1.016 0.962** 0.958*** 0.971** 0.995
Unemployment Rate
Findings I Aggregate Indicators (no Covariates)
p < 0.10 (*), p < 0.05 (**) and p < 0.01 (***)
Source: ECHP 1994-2001, own calculationsEPUNet 2006
France Finland Germany United Kingdom
Aggregate Indicator
Male Female Male Female Male Female Male Female
GNP 0.991 0.904** 1.083 1.079 0.869*** 0.901*** 0.933 0.988 Hazard Ratio
Nuts0 0.935 1.038 1.149*** 1.151*** 1.028 1.044 1.042 0.994
Nuts1 1.009 1.020 1.065*** 1.084*** 0.949** 0.958** 0.991 0.997
Nuts1 - by Gender
1.008 1.016 1.063*** 1.079*** 0.937*** 0.977* 0.994 0.996
Nuts1 - by Age
0.983** 1.006 1.039** 1.028** 0.959** 0.970** 0.987 1.004
Unemployment Rate
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Findings I Aggregate Indicators (Full Model w.o. Partner)
p < 0.10 (*), p < 0.05 (**) and p < 0.01 (***)
Source: ECHP 1994-2001, own calculations
France Finland Germany United Kingdom
Aggregate Indicator
Male Female Male Female Male Female Male Female
GNP 1.024 0.939 1.099 1.086 0.927** 0.941 0.970 1.025 Hazard Ratio
Nuts0 0.884** 0.983 1.091** 1.107*** 1.092 1.075 0.996 0.945
Nuts1 1.004 1.021 1.058** 1.071*** 0.978 0.985 0.989 0.995
Nuts1 - by Gender
1.003 1.017 1.056** 1.065** 0.974 0.990 0.990 0.998
Nuts1 - by Age
0.986* 1.006 1.037** 1.024** 0.976 0.991 0.993 1.008
Unemployment Rate
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Findings I Aggregate Indicators (Full Model with Partner)
p < 0.10 (*), p < 0.05 (**) and p < 0.01 (***)
Source: ECHP 1994-2001, own calculations
Conclusion I
• Effects for partial labour markets:
No significant effects for Persons in labour market
segments with higher and lower unemployment risks:
In detail: No significant effects for managers and senior officials, professionals or for
service and sales-persons and machine operators
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Conclusion II
• Widely negative fertility effects of high
unemployment rates
• Special case for Finland
• Gender specific uniform effect direction
• No converse effect direction for GNP and
Unemployment rates!
• Especially clear effects for detailed indicators =>
Individuals use differentiated information for
family formation decisionsEPUNet 2006
Conclusion III
France:
• No or slightly negative effects (especially if
controlling for youth unemployment)
Possibly related to the cultural traditions of work-family
combination and the extensive public support for
families
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Conclusion IV
Finland:
• Positive effects of high unemployment rates
Special case of extensively high unemployment
rates in Finland in the early 90ies
Possible interpretation: Family formation as a
focus on an alternative life goal (instead of labour
market integration)
Backing by an extensive public support
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Conclusion V
Germany:
• Diminished likelihood of family formation under
high unemployment
Work-family conflicts especially dominant in
Germany (breadwinner-homemaker model)
Sequential model of family formation as common
strategy (continued delay of family formation)
High level of social security shaping risk-averse
behaviourEPUNet 2006
Conclusion VI
United Kingdom:
• No significant effects of aggregate economic
indicators
Deregulated labour market with a high level of
entry and exit rates
Possibility: Labour market related risks are
common and thus do not affect childbirth decisns.
Low level of social security, that diminishes
subjective risk perceptionEPUNet 2006