Although economic agents routinely face various types of economic uncertainty, their effects are often unclear and hard to assess, in part due to the absence of suitable measures of uncertainty. Because of the numerous and very substantial institutional changes that people in the transition economies of Central and Eastern Europe experienced during the last two decades, these countries are excellent candidates for examining the effects of uncertainties on various kinds of behavior. During their periods of uncertainty, moreover, these countries have experienced sharply falling fertility rates. Some have argued that these two phenomena are linked but others have remained skeptical in view of the fact that the evidence is largely confined to the macro level. This paper demonstrates the existence of such a link at the micro level using two different types of uncertainty measures based on GSOEP data from Eastern (and for comparison purposes also Western) Germany for the years 1992-2002. The results suggest that employment uncertainty (but not financial uncertainty) was considerably greater in Eastern Germany during its transition than in Western Germany and had a highly nonlinear effect on the probability of a birth in any period. The result is rather robust to differences in specification and suggests that the higher employment uncertainty in East Germany in the transition could have contributed significantly to the sharp fall and unusually low level of its fertility. In view of the results, we argue that an options based theory is perhaps a richer analytical paradigm for a discussion of fertility decisions in a rapidly changing environment than the traditional Beckerian theory.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number
1746.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: