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Fertility Choice and Financial Development

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  • Valerio Filoso
  • Erasmo Papagni

Abstract

We study the consequences of broader access to credit and to capital markets on household's decisions over the number of children. In a life-cycle model of choice with forward and backward caring between parents and children, we analyze the effects of relaxing adults' borrowing constrains and broadening the opportunities for financial investment, and show how the sign of these effects depends on the role of children as a normal or inferior good in parents' preferences. We estimate the quantitative implications of our theoretical model on data from 145 countries over the period 1980-2006. Empirical results indicate that improved access to credit reduces fertility in poor countries and increases fertility in high-income countries. The effect of the development of capital markets on the number of children is negative in low-income countries and positive in the rich. When the analysis includes public pensions the main results remain the same. We also estimate the effect of the real interest rate, which proves significant and negative.

Suggested Citation

  • Valerio Filoso & Erasmo Papagni, 2011. "Fertility Choice and Financial Development," EERI Research Paper Series EERI_RP_2011_02, Economics and Econometrics Research Institute (EERI), Brussels.
  • Handle: RePEc:eei:rpaper:eeri_rp_2011_02
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    Cited by:

    1. George Naufal, 2015. "Impact of remittances on fertility," IZA World of Labor, Institute for the Study of Labor (IZA), pages 207-207, November.
    2. repec:spr:soinre:v:133:y:2017:i:2:d:10.1007_s11205-016-1382-6 is not listed on IDEAS

    More about this item

    Keywords

    Fertility; Financial Markets Development; Old-Age Security.;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • G1 - Financial Economics - - General Financial Markets

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