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The Relationship between Consumption, Labor Supply and Fertility: Theory and Evidence from Japan

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  • Aoki, Reiko
  • Konishi, Yoko

Abstract

We present an alternative explanation of the positive relationship between total fertility rate (TFR) and female labor participation rate (FLPR) observed in recent cross section of OECD countries. We first show quality adjusted consumption is related to fertility and female labor supply in a general equilibrium model with vertical quality differentiation and heterogeneous labor. Then we verify this relationship with Japanese cross sectional data from 8 different points in time (every five years from 1970-2005) in which a positive correlation between TFR and FLPR among prefectures (regions) have been observed since 1980. We show that consumption variables are statistically significant when they are added to the cross section regression of TFR on FLPR. However, the FLPR coefficient is no longer significant at the 5% level when quality of consumption variables are included in the regression. Furthermore, FLPR has a statistically significant negative effect on TFR in addition to the statistically significant consumption variables, once we take both time-variant regional heterogeneity of consumption and time-invariant heterogeneity into account using the fixed effect model.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/17114/1/pie_dp420.pdf
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Bibliographic Info

Paper provided by Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University in its series PIE/CIS Discussion Paper with number 420.

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Length: 20 p.
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:hit:piecis:420

Note: 2 January, 2009
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  1. Diane J. Macunovich, 1998. "Fertility and the Easterlin hypothesis: An assessment of the literature," Journal of Population Economics, Springer, vol. 11(1), pages 53-111.
  2. David Bloom & David Canning & Günther Fink & Jocelyn Finlay, 2009. "Fertility, female labor force participation, and the demographic dividend," Journal of Economic Growth, Springer, vol. 14(2), pages 79-101, June.
  3. Michael Funke & Holger Strulik, 2000. "On Endogenous Growth with Physical Capital, Human Capital and Product Variety," Quantitative Macroeconomics Working Papers 20004, Hamburg University, Department of Economics.
  4. Aoki, Reiko, 2008. "On the Persistence of Low Birthrate in Japan," PIE/CIS Discussion Paper 347, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  5. José María Da Rocha & Luisa Fuster, 2006. "Why Are Fertility Rates And Female Employment Ratios Positively Correlated Across O.E.C.D. Countries?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1187-1222, November.
  6. Flam, Harry & Helpman, Elhanan, 1987. "Vertical Product Differentiation and North-South Trade," American Economic Review, American Economic Association, vol. 77(5), pages 810-22, December.
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