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Fertility Choice and Financial Development

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  • Filoso, Valerio
  • Papagni, Erasmo

Abstract

We study the consequences of broader access to credit and to capital markets on household's decisions over the number of children. In a life-cycle model of choice with forward and backward caring between parents and children, we analyze the effects of relaxing adults' borrowing constrains and broadening the opportunities for financial investment, and show how the sign of these effects depends on the role of children as a normal or inferior good in parents' preferences. We estimate the quantitative implications of our theoretical model on data from 145 countries over the period 1980--2006. Empirical results indicate that improved access to credit reduces fertility in poor countries and increases fertility in high-income countries. The effect of the development of capital markets on the number of children is negative in low-income countries and positive in the rich. When the analysis includes public pensions the main results remain the same. We also estimate the effect of the real interest rate, which proves significant and negative.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25930.

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Date of creation: 15 Oct 2010
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Handle: RePEc:pra:mprapa:25930

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Keywords: Fertility; Financial Markets Development; Old-Age Security;

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References

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  1. Michele Boldrin & Mariacristina De Nardi & Larry E. Jones, 2005. "Fertility and Social Security," NBER Working Papers 11146, National Bureau of Economic Research, Inc.
  2. Bruce Sacerdote & James Feyrer, 2008. "Will the Stork Return to Europe and Japan? Understanding Fertility Within Developed Nations," NBER Working Papers 14114, National Bureau of Economic Research, Inc.
  3. Lagerlof, Nils-Petter, 1997. "Endogenous fertility and the old-age security hypothesis: A note," Journal of Public Economics, Elsevier, vol. 64(2), pages 279-286, May.
  4. Willis, Robert J, 1973. "A New Approach to the Economic Theory of Fertility Behavior," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages S14-64, Part II, .
  5. Thorsten Beck & Asli Demirgüç-Kunt & Ross Levine, 2000. "A New Database on the Structure and Development of the Financial Sector," World Bank Economic Review, World Bank Group, vol. 14(3), pages 597-605, September.
  6. Cigno, Alessandro & Rosati, Furio C., 1996. "Jointly determined saving and fertility behaviour: Theory, and estimates for Germany, Italy, UK and USA," European Economic Review, Elsevier, vol. 40(8), pages 1561-1589, November.
  7. Carol Scotese Lehr, 1999. "Banking on fewer children: Financial intermediation, fertility and economic development," Journal of Population Economics, Springer, vol. 12(4), pages 567-590.
  8. Cigno, Alessandro & Rosati, Furio Camillo, 1992. "The Effects of Financial Markets and Social Security on Saving and Fertility Behaviour in Italy," Journal of Population Economics, Springer, vol. 5(4), pages 319-41.
  9. Isaac Ehrlich & Jinyoung Kim, 2007. "Social Security and Demographic Trends: Theory and Evidence from the International Experience," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(1), pages 55-77, January.
  10. Larry E. Jones & Alice Schoonbroodt & Michèle Tertilt, 2010. "Fertility Theories: Can They Explain the Negative Fertility-Income Relationship?," NBER Chapters, in: Demography and the Economy, pages 43-100 National Bureau of Economic Research, Inc.
  11. Mark Pin & Shahidur Khandker & Signe-Mary Mckernan & M. Latif, 1999. "Credit programs for the poor and reproductive behavior in low-income countries: Are the reported causal relationships the result of heterogeneity bias?," Demography, Springer, vol. 36(1), pages 1-21, February.
  12. Nishimura, K. & Zhang, J., 1990. "Pay-As-You-Go Public Pensions With Endogenous Fertility," Papers 202, Australian National University - Department of Economics.
  13. Theodore W. Schultz, 1974. "Economics of the Family: Marriage, Children, and Human Capital," NBER Books, National Bureau of Economic Research, Inc, number schu74-1, octubre-d.
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  1. Financial development and fertility
    by Economic Logician in Economic Logic on 2010-11-26 18:42:00

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