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Do Family Wealth Shocks Affect Fertility Choices? Evidence from the Housing Market Boom and Bust

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  • Michael Lovenheim

    ()
    (Cornell University)

  • Kevin Mumford

    ()
    (Purdue University)

Abstract

Little is known about how wealth affects fertility decisions of the household. This paper fills this gap by investigating how changes in housing wealth affect fertility. We first conduct a state-level aggregate analysis to investigate how the birth rate is related to housing prices using differences in the timing and size of the housing market boom and bust across different states over time. We then conduct an analysis using restricted-use data from the Panel Study of Income Dynamics that allows us to track how women’s fertility behavior is related to individual-level housing price growth. We find that for homeowners, a $10,000 increase in real housing wealth causes a 0.07 percent increase in fertility. We find little effects of MSA-level housing price growth on the fertility of renters, which supports our identification strategy. That increases in housing wealth are strongly associated with increases in fertility is consistent with some recent work showing a positive income effect on births, and our estimates are suggestive that the large recent variation in the housing market could have sizeable demographic effects that are driven by the positive effect of housing wealth on fertility.

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Bibliographic Info

Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 09-004.

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Date of creation: Jan 2010
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Handle: RePEc:sip:dpaper:09-004

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Keywords: fertility; wealth shocks; housing market; demographics;

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References

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  1. Edward L. Glaeser & Joseph Gyourko & Raven E. Saks, 2005. "Why Have Housing Prices Gone Up?," Harvard Institute of Economic Research Working Papers 2061, Harvard - Institute of Economic Research.
  2. John Campbell & Joao Cocco, 2004. "How Do House Prices Affect Consumption? Evidence from Micro Data," 2004 Meeting Papers 357a, Society for Economic Dynamics.
  3. Joseph Gyourko & Christopher Mayer & Todd Sinai, 2013. "Superstar Cities," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 167-99, November.
  4. Alma Cohen & Rajeev Dehejia & Dmitri Romanov, 2007. "Do Financial Incentives Affect Fertility?," NBER Working Papers 13700, National Bureau of Economic Research, Inc.
  5. Karl E. Case & John M. Quigley & Robert J. Shiller, 2001. "Comparing Wealth Effects: The Stock Market versus the Housing Market," Cowles Foundation Discussion Papers 1335, Cowles Foundation for Research in Economics, Yale University.
  6. Dan Black & Natalia Kolesnikova & Seth G. Sanders & Lowell J. Taylor, 2009. "Are children 'normal'?," Working Papers 2008-040, Federal Reserve Bank of St. Louis.
  7. Orazio Attanasio & Laura Blow & Robert Hamilton & Andrew Leicester, 2005. "Booms and busts: consumption, house prices and expectations," IFS Working Papers W05/24, Institute for Fiscal Studies.
  8. George B. Roberts, Chairman, Universities-National Bureau Committee for Economic Research, 1960. "Demographic and Economic Change in Developed Countries," NBER Books, National Bureau of Economic Research, Inc, number univ60-2.
  9. Andreas Lehnert, 2004. "Housing, consumption, and credit constraints," Finance and Economics Discussion Series 2004-63, Board of Governors of the Federal Reserve System (U.S.).
  10. Gopi Shah Goda & Kevin J. Mumford, 2009. "Fertility Response to the Tax Treatment of Children," Purdue University Economics Working Papers 1219, Purdue University, Department of Economics.
  11. Kevin Milligan, 2005. "Subsidizing the Stork: New Evidence on Tax Incentives and Fertility," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 539-555, August.
  12. Jason M. Lindo, 2010. "Are Children Really Inferior Goods? Evidence from Displacement-Driven Income Shocks," Journal of Human Resources, University of Wisconsin Press, vol. 45(2).
  13. Oded Galor, 2004. "The Demographic Transition and the Emergence of Sustained Economic Growth," GE, Growth, Math methods 0409005, EconWPA.
  14. Daniel Parent & Ling Wang, 2007. "Tax incentives and fertility in Canada: quantum vs tempo effects," Canadian Journal of Economics, Canadian Economics Association, vol. 40(2), pages 371-400, May.
  15. Hurst, Erik & Stafford, Frank, 2004. "Home Is Where the Equity Is: Mortgage Refinancing and Household Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 985-1014, December.
  16. Larry E. Jones & Alice Schoonbroodt & Michèle Tertilt, 2008. "Fertility Theories: Can They Explain the Negative Fertility-Income Relationship?," NBER Working Papers 14266, National Bureau of Economic Research, Inc.
  17. Gregory Clark, 2005. "Human Capital, Fertility, and the Industrial Revolution," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 505-515, 04/05.
  18. Heckman, James J & Walker, James R, 1990. "The Relationship between Wages and Income and the Timing and Spacing of Births: Evidence from Swedish Longitudinal Data," Econometrica, Econometric Society, vol. 58(6), pages 1411-41, November.
  19. Reagan Baughman & Stacy Dickert-Conlin, 2003. "Did Expanding the EITC Promote Motherhood?," American Economic Review, American Economic Association, vol. 93(2), pages 247-251, May.
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Citations

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Cited by:
  1. Fichera, E.; & Gathergood, J.;, 2013. "House Prices, Home Equity and Health," Health, Econometrics and Data Group (HEDG) Working Papers 13/01, HEDG, c/o Department of Economics, University of York.
  2. Huttunen, Kristiina & Kellokumpu, Jenni, 2012. "The effect of job displacement on couples' fertility decisions," MPRA Paper 36964, University Library of Munich, Germany.
  3. Richard Disney & John Gathergood, 2013. "House Prices, Wealth Effects and Labour Supply," Discussion Papers 13/02, University of Nottingham, School of Economics.
  4. Lisa J. Dettling & Melissa Schettini Kearney, 2011. "House Prices and Birth Rates: The Impact of the Real Estate Market on the Decision to Have a Baby," NBER Working Papers 17485, National Bureau of Economic Research, Inc.

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