IDEAS home Printed from https://ideas.repec.org/p/shf/wpaper/2013011.html
   My bibliography  Save this paper

Fertility and Financial Development: Evidence from U.S. Counties in the 19th Century

Author

Listed:
  • Alberto Basso

    (Plymouth Business School)

  • David Cuberes

    (Department of Economics, The University of Sheffield)

Abstract

This paper uses data on fertility and financial development in 19th century U.S. to test the hypothesis that more developed local financial markets reduce the incentives for families to have a large offspring to provide for them at old age, the so-called old-age security hypothesis. We find that the presence of banks is associated to lower children-to-women ratios and crude birth rates even after controlling for a large set of socio-economic factors. To account for possible endogeneity of bank location we instrument for the presence of some banking activity in a given county in 1840 with the existence of at least a bank in that county in 1820. The results of using this identification strategy are in line with the OLS ones, namely that fertility in 1850 is negatively affected by financial development. Next we explore the relationship between banking activity and fertility in the state of Pennsylvania, where, by law, most banks were created before 1820. This allows us to treat banks in 1840 as exogenous and confirm the existence of a strong negative causal effect from financial development to fertility. Finally, we show that our results are robust to measuring banking activity with the number of cities with at least a bank in a given county.

Suggested Citation

  • Alberto Basso & David Cuberes, 2013. "Fertility and Financial Development: Evidence from U.S. Counties in the 19th Century," Working Papers 2013011, The University of Sheffield, Department of Economics.
    • Handle: RePEc:shf:wpaper:2013011
    as

    Download full text from publisher

    File URL: http://www.shef.ac.uk/economics/research/serps/articles/2013_011.html
    File Function: First version, 2013
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. P. Wilner Jeanty, 2010. "SPMLREG: Stata module to estimate the spatial lag, the spatial error, the spatial durbin, and the general spatial models by maximum likelihood," Statistical Software Components S457135, Boston College Department of Economics, revised 25 Dec 2013.
    2. Gary S. Becker, 1981. "A Treatise on the Family," NBER Books, National Bureau of Economic Research, Inc, number beck81-1, March.
    3. Gary S. Becker & H. Gregg Lewis, 1974. "Interaction between Quantity and Quality of Children," NBER Chapters, in: Economics of the Family: Marriage, Children, and Human Capital, pages 81-90, National Bureau of Economic Research, Inc.
    4. Oded Galor, 2012. "The demographic transition: causes and consequences," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 6(1), pages 1-28, January.
    5. Howard Bodenhorn & David Cuberes, 2010. "Financial development and city growth: Evidence from Northeastern American cities, 1790-1870," Working Papers 2010/35, Institut d'Economia de Barcelona (IEB).
    6. Kalemli-Ozcan, Sebnem, 2002. "Does the Mortality Decline Promote Economic Growth?," Journal of Economic Growth, Springer, vol. 7(4), pages 411-439, December.
    7. Sah, Raaj Kumar, 1991. "The Effects of Child Mortality Changes on Fertility Choice and Parental Welfare," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 582-606, June.
    8. Goldin, Claudia, 1992. "Understanding the Gender Gap: An Economic History of American Women," OUP Catalogue, Oxford University Press, number 9780195072709.
    9. Entwisle, Barbara & Winegarden, C R, 1984. "Fertility and Pension Programs in LDCs: A Model of Mutual Reinforcement," Economic Development and Cultural Change, University of Chicago Press, vol. 32(2), pages 331-354, January.
    10. Sascha O. Becker & Francesco Cinnirella & Ludger Woessmann, 2013. "Does women's education affect fertility? Evidence from pre-demographic transition Prussia," European Review of Economic History, European Historical Economics Society, vol. 17(1), pages 24-44, February.
    11. Sascha O. Becker & Francesco Cinnirella & Ludger Woessmann, 2012. "The effect of investment in children’s education on fertility in 1816 Prussia," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 6(1), pages 29-44, January.
    12. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2009. "Does Local Financial Development Matter?," Springer Books, in: Damiano Bruno Silipo (ed.), The Banks and the Italian Economy, chapter 0, pages 31-66, Springer.
    13. Sascha Becker & Francesco Cinnirella & Ludger Woessmann, 2010. "The trade-off between fertility and education: evidence from before the demographic transition," Journal of Economic Growth, Springer, vol. 15(3), pages 177-204, September.
    14. Ehrlich, Isaac & Lui, Francis T, 1991. "Intergenerational Trade, Longevity, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1029-1059, October.
    15. Rosenzweig, Mark R & Evenson, Robert E, 1977. "Fertility, Schooling, and the Economic Contribution of Children in Rural India: An Econometric Analysis," Econometrica, Econometric Society, vol. 45(5), pages 1065-1079, July.
    16. Wanamaker, Marianne H., 2012. "Industrialization and Fertility in the Nineteenth Century: Evidence from South Carolina," The Journal of Economic History, Cambridge University Press, vol. 72(1), pages 168-196, March.
    17. Bodenhorn, Howard, 2008. "Free banking and bank entry in nineteenth-century New York," Financial History Review, Cambridge University Press, vol. 15(2), pages 175-201, October.
    18. Galor, Oded & Weil, David N, 1996. "The Gender Gap, Fertility, and Growth," American Economic Review, American Economic Association, vol. 86(3), pages 374-387, June.
    19. Timothy W. Guinnane, 2011. "The Historical Fertility Transition: A Guide for Economists," Journal of Economic Literature, American Economic Association, vol. 49(3), pages 589-614, September.
    20. Howard Bodenhorn & David Cuberes, 2010. "Financial Development and City Growth: Evidence from Northeastern American Cities, 1790-1870," NBER Working Papers 15997, National Bureau of Economic Research, Inc.
    21. Barro, Robert J & Becker, Gary S, 1989. "Fertility Choice in a Model of Economic Growth," Econometrica, Econometric Society, vol. 57(2), pages 481-501, March.
    22. Lagerlof, Nils-Petter, 2003. "Gender Equality and Long-Run Growth," Journal of Economic Growth, Springer, vol. 8(4), pages 403-426, December.
    23. Neher, Philip A, 1971. "Peasants, Procreation, and Pensions," American Economic Review, American Economic Association, vol. 61(3), pages 380-389, June.
    24. Clark, Gregory & Hamilton, Gillian, 2006. "Survival of the Richest: The Malthusian Mechanism in Pre-Industrial England," The Journal of Economic History, Cambridge University Press, vol. 66(3), pages 707-736, September.
    25. Tamura, Robert, 2006. "Human capital and economic development," Journal of Development Economics, Elsevier, vol. 79(1), pages 26-72, February.
    26. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1986. "Some Welfare Theoretic Implications of Endogenous Fertility," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 3-31, February.
    27. Tamura, Robert, 1996. "From decay to growth: A demographic transition to economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 20(6-7), pages 1237-1261.
    28. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1987. "Household and Economy," Elsevier Monographs, Elsevier, edition 1, number 9780125157520 edited by Shell, Karl.
    29. Fabrice Murtin, 2013. "Long-Term Determinants of the Demographic Transition, 1870–2000," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 617-631, May.
    30. Clark, Gregory & Hamilton, Gillian, 2006. "Survival of the Richest: The Malthusian Mechanism in Pre-Industrial England," The Journal of Economic History, Cambridge University Press, vol. 66(03), pages 707-736, September.
    31. Jensen, Eric R, 1990. "An Econometric Analysis of the Old-Age Security Motive for Childbearing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(4), pages 953-968, November.
    32. David N. Weil & Oded Galor, 2000. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond," American Economic Review, American Economic Association, vol. 90(4), pages 806-828, September.
    33. Morand, Olivier F, 1999. "Endogenous Fertility, Income Distribution, and Growth," Journal of Economic Growth, Springer, vol. 4(3), pages 331-349, September.
    34. Michele Boldrin & Larry E. Jones, 2002. "Mortality, Fertility, and Saving in a Malthusian Economy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(4), pages 775-814, October.
    35. Patrick R. Galloway & Ronald D. Lee & Eugene a. Hammel, 1998. "Urban versus Rural: Fertility Decline in the Cities and Rural Districts of Prussia, 1875 to 1910," European Journal of Population, Springer;European Association for Population Studies, vol. 14(3), pages 209-264, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Samyukta Bhupatiraju, 2022. "Fertility and financial development: an analysis of Indian households," Quality & Quantity: International Journal of Methodology, Springer, vol. 56(2), pages 589-606, April.
    2. Muhammad Zakaria & Bashir Ahmed Fida & Saquib Yousaf Janjua & Syed Jawad Hussain Shahzad, 2017. "Fertility and Financial Development in South Asia," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(2), pages 645-668, September.
    3. Grimm, Michael, 2016. "Rainfall Risk and Fertility: Evidence from Farm Settlements during the American Demographic Transition," IZA Discussion Papers 10351, Institute of Labor Economics (IZA).
    4. Govindapuram Suresh, 2023. "Financial Inclusion and Its Impact on Fertility: An Empirical Investigation," Indian Journal of Human Development, , vol. 17(2), pages 344-358, August.
    5. Tao Li, 2016. "Spousal Age Gap and Fertility Preferences within a Family," Economics Bulletin, AccessEcon, vol. 36(2), pages 970-975.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David Cuberes & Alberto Basso, 2012. "Human Capital, Culture and the Onset of the Demographic Transition," Working Papers 2012024, The University of Sheffield, Department of Economics.
    2. Bloom, D.E. & Luca, D.L., 2016. "The Global Demography of Aging," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 3-56, Elsevier.
    3. 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.
    4. Jakob Madsen & Holger Strulik, 2023. "Testing unified growth theory: Technological progress and the child quantity‐quality tradeoff," Quantitative Economics, Econometric Society, vol. 14(1), pages 235-275, January.
    5. Oded Galor, 2012. "The demographic transition: causes and consequences," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 6(1), pages 1-28, January.
    6. Claude Diebolt & Faustine Perrin, 2013. "From Stagnation to Sustained Growth: The Role of Female Empowerment," American Economic Review, American Economic Association, vol. 103(3), pages 545-549, May.
    7. Papagni, Erasmo, 2018. "Fertility Transitions in Developing Countries: Convergence, Timing, and Causes," GLO Discussion Paper Series 248, Global Labor Organization (GLO).
    8. Philipp Ager & Benedikt Herz & Markus Brueckner, 2020. "Structural Change and the Fertility Transition," The Review of Economics and Statistics, MIT Press, vol. 102(4), pages 806-822, October.
    9. Cuberes, David & Tamura, Robert, 2014. "Equilibrium and Optimal Fertility with Increasing Returns to Population and Endogenous Fertility," MPRA Paper 57063, University Library of Munich, Germany.
    10. Bloom, David E. & Luca, Dara Lee, 2016. "The Global Demography of Aging: Facts, Explanations, Future," IZA Discussion Papers 10163, Institute of Labor Economics (IZA).
    11. Michael Bar & Oksana Leukhina, 2010. "Demographic Transition and Industrial Revolution: A Macroeconomic Investigation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(2), pages 424-451, April.
    12. Ehrlich, Isaac & Lui, Francis, 1997. "The problem of population and growth: A review of the literature from Malthus to contemporary models of endogenous population and endogenous growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 205-242, January.
    13. Sascha O. Becker & Francesco Cinnirella & Ludger Woessmann, 2013. "Does women's education affect fertility? Evidence from pre-demographic transition Prussia," European Review of Economic History, European Historical Economics Society, vol. 17(1), pages 24-44, February.
    14. Robert TAMURA & David CUBERES, 2020. "Equilibrium and A-efficient Fertility with Increasing Returns to Population and Endogenous Mortality," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 86(2), pages 157-182, June.
    15. 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.
    16. Vogel, Edgar, 2011. "Human Capital and the Demographic Transition: Why Schooling Became Optimal," MEA discussion paper series 11247, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    17. Youssouf Merouani & Faustine Perrin, 2022. "Gender and the long-run development process. A survey of the literature [Rethinking age heaping: A cautionary tale from nineteenth-century Italy]," European Review of Economic History, European Historical Economics Society, vol. 26(4), pages 612-641.
    18. Brian Beach & W. Walker Hanlon, 2019. "Censorship, Family Planning, and the Historical Fertility Transition," NBER Working Papers 25752, National Bureau of Economic Research, Inc.
    19. Larry E. Jones & Michele Tertilt, 2006. "An Economic History of Fertility in the U.S.: 1826-1960," NBER Working Papers 12796, National Bureau of Economic Research, Inc.
    20. repec:pri:rpdevs:vogl_family_size is not listed on IDEAS
    21. Luciano Fanti & Luca Gori, 2012. "Public Expenditure on Health and Private Old-Age Insurance in an OLG Growth Model with Endogenous Fertility: Chaotic Dynamics Under Perfect Foresight," Computational Economics, Springer;Society for Computational Economics, vol. 40(4), pages 333-353, December.

    More about this item

    Keywords

    fertility; old-age security hypothesis; financial development; 19th century U.S.;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • N31 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: Pre-1913
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:shf:wpaper:2013011. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mike Crabtree (email available below). General contact details of provider: https://edirc.repec.org/data/desheuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.