The Dynamics of Fertility, Bargaining, and Human Capital Accumulation

This paper studies the role of intrahousehold bargaining in shaping women’s fertil ity decisions over the life cycle. I develop and estimate a quantitative life-cycle model featuring a dynamic feedback loop between fertility and bargaining power: childbirth low ers women’s wages and outside options, weakening their bargaining position within the household and further constraining their autonomy over future fertility decisions. These bargaining concerns are quantitatively important in depressing marriage incentives, gener ating inefficient divorce, and consequently lower fertility at the household level. Exploiting the relaxation of the One-Child Policy in China, I show that couples with misaligned fer tility preferences exhibit smaller fertility responses and higher divorce rates than couples with aligned preferences. The estimated model further indicates that such couples are less likely to form marriages and tend to marry at later ages. Removing bargaining frictions encourages earlier childbearing, increases completed fertility, and strengthens fertility re sponse to family policies.