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House prices and birth rates: The impact of the real estate market on the decision to have a baby

Author Info

Listed author(s):
  • Dettling, Lisa J.
  • Kearney, Melissa S.

Abstract

This project investigates how changes in Metropolitan Statistical Area (MSA)-level house prices affect household fertility decisions. Recognizing that housing is a major cost associated with child rearing, and assuming that children are normal goods, we hypothesize that an increase in house prices will have a negative price effect on current period fertility. This applies to both potential first-time homeowners and current homeowners who might upgrade to a bigger house with the addition of a child. On the other hand, for current homeowners, an increase in MSA-level house prices will increase home equity, leading to a positive effect on birth rates. Our results suggest that indeed, short-term increases in house prices lead to a decline in births among non-owners and a net increase among owners. The estimates imply that a $10,000 increase leads to a 5% increase in fertility rates among owners and a 2.4% decrease among non-owners. At the mean U.S. home ownership rate, these estimates imply that the net effect of a $10,000 increase in house prices is a 0.8% increase in current period fertility rates. Given underlying differences in home ownership rates, the predicted net effect of house price changes varies across demographic groups. In addition, we find that changes in house prices exert a larger effect on current period birth rates than do changes in unemployment rates.

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File URL: http://www.sciencedirect.com/science/article/pii/S0047272713001904
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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 110 (2014)
Issue (Month): C ()
Pages: 82-100

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Handle: RePEc:eee:pubeco:v:110:y:2014:i:c:p:82-100
DOI: 10.1016/j.jpubeco.2013.09.009
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

Keywords: Fertility; HPI; Credit constraints; Home equity; Cyclicality of births; MSA; Housing market;

Other versions of this item:

Find related papers by JEL classification:
  • D10 - Microeconomics - - Household Behavior - - - General
  • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
  • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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  1. Rajeev Dehejia & Adriana Lleras-Muney, 2004. "Booms, Busts, and Babies' Health," The Quarterly Journal of Economics, Oxford University Press, vol. 119(3), pages 1091-1130.
  2. Albert Saiz, 2008. "On Local Housing Supply Elasticity," ERES eres2008_241, European Real Estate Society (ERES).
  3. Case Karl E. & Quigley John M. & Shiller Robert J., 2005. "Comparing Wealth Effects: The Stock Market versus the Housing Market," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-34, May.
  4. Dan A. Black & Natalia Kolesnikova & Seth G. Sanders & Lowell J. Taylor, 2013. "Are Children “Normal”?," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 21-33, March.
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  6. Rappaport, Jordan & Sachs, Jeffrey D, 2003. "The United States as a Coastal Nation," Journal of Economic Growth, Springer, vol. 8(1), pages 5-46, March.
  7. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 1253-1296.
  8. Glaeser, Edward L. & Gyourko, Joseph & Saiz, Albert, 2008. "Housing supply and housing bubbles," Journal of Urban Economics, Elsevier, vol. 64(2), pages 198-217, September.
  9. Alma Cohen & Rajeev Dehejia & Dmitri Romanov, 2007. "Do Financial Incentives Affect Fertility?," NBER Working Papers 13700, National Bureau of Economic Research, Inc.
  10. Michael Lovenheim & Kevin Mumford, 2010. "Do Family Wealth Shocks Affect Fertility Choices? Evidence from the Housing Market Boom and Bust," Discussion Papers 09-004, Stanford Institute for Economic Policy Research.
  11. Atif Mian & Amir Sufi, 2009. "The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1449-1496.
  12. repec:arz:wpaper:eres2008-241 is not listed on IDEAS
  13. Bostic, Raphael & Gabriel, Stuart & Painter, Gary, 2009. "Housing wealth, financial wealth, and consumption: New evidence from micro data," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 79-89, January.
  14. Voram Ben-Porath, 1973. "Short-term fluctuations in fertility and economic activity in Israel," Demography, Springer;Population Association of America (PAA), vol. 10(2), pages 185-204, May.
  15. 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 1411-1441, November.
  16. Todd Sinai, 2012. "House Price Moments in Boom-Bust Cycles," NBER Chapters,in: Housing and the Financial Crisis, pages 19-68 National Bureau of Economic Research, Inc.
  17. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
  18. 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).
  19. Morris Silver, 1965. "Births, Marriages, and Business Cycles in the United States," Journal of Political Economy, University of Chicago Press, vol. 73, pages 237-237.
  20. Simon, Curtis J. & Tamura, Robert, 2009. "Do higher rents discourage fertility? Evidence from U.S. cities, 1940-2000," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 33-42, January.
  21. repec:pri:cheawb:adriana_booms is not listed on IDEAS
  22. 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.
  23. Gary S. Becker, 1960. "An Economic Analysis of Fertility," NBER Chapters,in: Demographic and Economic Change in Developed Countries, pages 209-240 National Bureau of Economic Research, Inc.
  24. Bound, John & Holzer, Harry J, 2000. "Demand Shifts, Population Adjustments, and Labor Market Outcomes during the 1980s," Journal of Labor Economics, University of Chicago Press, vol. 18(1), pages 20-54, January.
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