A note on the changing relationship between fertility and female employment rates in developed countries

In this paper we look at a panel of OECD aggregate fertility and labor market data between 1970 and 1995 and we report some striking recent developments. Total Fertility Rates (TFR) were falling and Female Participation Rates were increasing, conforming to a well known long-run trend. Along the cross-sectional dimension, the correlation between TFR and FPR was negative and significant d uring the 1970's and up to the early 1980's. This seemed consistent with secular comovements. However, by the late 1980's the correlation had become positive a nd equally significant. We discuss our findings within the framework of standard n eoclassical models of fertility and labor supply adapted to macro data, as in Butz and Ward (1979). In order to explain the reversal of the correlation between fertility and participation rates, we consider simple extensions of their framework. First, we discuss the possibility that income e®ects of female wage increases are important. Next, we turn to three other factors: inflexible important. Next, we turn to three other factors: in°exible working hours faced by individual workers, the possibility of purchasing child care, and unemployment.