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Asymmetric Fertility Elasticities

Author

Listed:
  • Sam Engle
  • Chong Pang
  • Anson Zhou

Abstract

This paper develops a theory of fertility choice with loss aversion over consumption. Because children compete with consumption for household resources, loss-averse households cut fertility aggressively to protect living standards when adverse shocks push consumption below reference levels, but respond modestly to positive shocks. Cross-country panel data and quasi-experimental evidence support the model's predictions. A calibrated version attributes a substantial share of China's recent fertility decline to slowing income growth activating loss aversion. The findings suggest that pro-natalist policies are more effective during downturns, temporary subsidies may backfire upon withdrawal, and pro-fertility regimes should target higher fertility under income uncertainty.

Suggested Citation

  • Sam Engle & Chong Pang & Anson Zhou, 2026. "Asymmetric Fertility Elasticities," RFBerlin Discussion Paper Series 26120, ROCKWOOL Foundation Berlin (RFBerlin).
    • Handle: RePEc:crm:wpaper:26120
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    Keywords

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    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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