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Are Children Really Inferior Goods? Evidence from Displacement-Driven Income Shocks

  • Jason M. Lindo

This paper explores the causal link between income and fertility by analyzing women’s fertility response to the large and permanent income shock generated by a husband’s job displacement. I find that the shock reduces total fertility, suggesting that the causal effect of income on fertility is positive. A model that incorporates the time cost of children and assortative matching of spouses can simultaneously explain this result and the negative cross-sectional relationship. I also find that a husband’s displacement accelerates childbearing, which is consistent with lifecycle models of fertility in which the incentive to delay is driven by expected earnings growth.

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Article provided by University of Wisconsin Press in its journal Journal of Human Resources.

Volume (Year): 45 (2010)
Issue (Month): 2 ()

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Handle: RePEc:uwp:jhriss:v:45:y:2010:i2:p301-327
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