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Why did Rich Families Increase their Fertility? Inequality and Marketization of Child Care

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  • Michael Bar
  • Moshe Hazan
  • Oksana Leukhina
  • David Weiss
  • Hosny Zoabi

Abstract

A negative relationship between income and fertility has persisted for so long that its existence is often taken for granted. One economic theory builds on this relationship and argues that rising inequality leads to greater differential fertility between rich and poor. We show that the relationship between income and fertility has ?attened between 1980 and 2010 in the US, a time of increasing inequality, as high income families increased their fertility. These facts challenge the standard theory. We propose that marketization of parental time costs can explain the changing relationship between income and fertility. We show this result both theoretically and quantitatively, after disciplining the model on US data. We explore implications of changing differential fertility for aggregate human capital. Additionally, policies, such as the minimum wage, that affect the cost of marketization, have a negative effect on the fertility and labor supply of high income women. We end by discussing the insights of this theory to the economics of marital sorting.

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  • Michael Bar & Moshe Hazan & Oksana Leukhina & David Weiss & Hosny Zoabi, 2018. "Why did Rich Families Increase their Fertility? Inequality and Marketization of Child Care," Working Papers 2018-22, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:2018-022
    DOI: doi.org/10.20955/wp.2018.022
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    2. Doepke, Matthias & Hannusch, Anne & Kindermann, Fabian & Tertilt, Michèle, 2022. "The Economics of Fertility: A New Era," IZA Discussion Papers 15224, Institute of Labor Economics (IZA).
    3. Jeremy Greenwood & Nezih Guner & Ricardo Marto, 2021. "The Great Transition: Kuznets Facts for Family-Economists," Economie d'Avant Garde Research Reports 33, Economie d'Avant Garde.
    4. R.D. Mariani & F. C. Rosati, 2022. "Immigrant supply of marketable child care and native fertility in Italy," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 88(4), pages 503-533, December.
    5. Abebe HAILEMARIAM, 2024. "Income and differential fertility: evidence from oil price shocks," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 90(1), pages 31-54, March.
    6. Auray, Stéphane & Fuller, David L. & Vandenbroucke, Guillaume, 2021. "Comparative advantage and moonlighting," European Economic Review, Elsevier, vol. 139(C).
    7. Nguyen Thang Dao & Julio Dávila & Angela Greulich, 2021. "The education gender gap and the demographic transition in developing countries," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(2), pages 431-474, April.
    8. Hanna Virtanen & Mikko Silliman & Tiina Kuuppelomäki & Kristiina Huttunen, "undated". "Education, Gender, and Family Formation," Working Papers 340, Työn ja talouden tutkimus LABORE, The Labour Institute for Economic Research LABORE.
    9. Seongeun Kim & Michele Tertilt & Minchul Yum, 2019. "Status Externalities and Low Birth Rates in Korea," 2019 Meeting Papers 604, Society for Economic Dynamics.
    10. Eric Schuss & Mohammed Azaouagh, 2023. "The expansion of early childcare and transitions to first and second birth in Germany," Bulletin of Economic Research, Wiley Blackwell, vol. 75(2), pages 476-507, April.
    11. Nakamura, Nobuyuki & Suzuki, Aya, 2023. "Impact of foreign domestic workers on the fertility decision of households: evidence from Hong Kong," Journal of Demographic Economics, Cambridge University Press, vol. 89(1), pages 105-135, March.
    12. Steffen Peters & Erich Striessnig & Maria Rita Testa & Alessandra Trimarchi & Natalie Nitsche, 2023. "Too worried about the environment to have children? Or more worried about the environment after having children? The reciprocal relationship between environmental concerns and fertility," MPIDR Working Papers WP-2023-023, Max Planck Institute for Demographic Research, Rostock, Germany.
    13. Georgios Mavropoulos & Theodore Panagiotidis, 2021. "On the drivers of the fertility rebound," Economic Change and Restructuring, Springer, vol. 54(3), pages 821-845, August.
    14. Oliwia Komada, 2023. "Raising America's future: search for optimal child-related transfers," GRAPE Working Papers 84, GRAPE Group for Research in Applied Economics.
    15. Yu, Mingzhe & Deng, Xin, 2021. "The Inheritance of Marketization Level and Regional Human Capital Accumulation: Evidence from China," Finance Research Letters, Elsevier, vol. 43(C).
    16. Yuki Uemura, 2023. "The Impacts of Family Policies on Labor Supply, Fertility, and Social Welfare," KIER Working Papers 1100, Kyoto University, Institute of Economic Research.
    17. Libertad González & Hosny Zoabi, 2021. "Does Paternity Leave Promote Gender Equality within Households?," CESifo Working Paper Series 9430, CESifo.
    18. Kimura, Masako & Yasui, Daishin, 2023. "Fertility differential, public policy, and development," Economics Letters, Elsevier, vol. 226(C).
    19. Bar-El, Ronen & Hatsor, Limor & Tobol, Yossef, 2020. "Home production, market substitutes, and the labor supply of mothers," Journal of Economic Behavior & Organization, Elsevier, vol. 171(C), pages 378-390.
    20. João Galindo da Fonseca & Charles Berubé, 2023. "Spouses, Children, And Entrepreneurship," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(3), pages 1165-1199, August.
    21. Meng, Lina & Peng, Lu & Zhou, Yinggang, 2023. "Do housing booms reduce fertility intentions? Evidence from the new two-child policy in China," Regional Science and Urban Economics, Elsevier, vol. 101(C).
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    23. Chen, Nana & Xu, Hangtian, 2021. "Why has the birth rate relatively increased in China's wealthy cities?," MPRA Paper 105960, University Library of Munich, Germany.
    24. Bloom, David E. & Kuhn, Michael & Prettner, Klaus, 2023. "Fertility in High-Income Countries: Trends, Patterns, Determinants, and Consequences," IZA Discussion Papers 16500, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Income Inequality; Marketization; Differential Fertility; Human Capital; Minimum Wage;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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