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House Prices and Birth Rates: The Impact of the Real Estate Market on the Decision to Have a Baby

  • Lisa J. Dettling
  • Melissa Schettini Kearney

This project investigates how changes in Metropolitan Statistical Area (MSA)- level housing prices affect household fertility decisions. Recognizing that housing is a major cost associated with child rearing, and assuming that children are normal goods, we hypothesize that an increase in real estate prices will have a negative price effect on current period fertility. This applies to both potential first-time homeowners and current homeowners who might upgrade to a bigger house with the addition of a child. On the other hand, for current homeowners, an increase in MSA-level house prices will increase home equity, leading to a positive effect on birth rates. Controlling for MSA fixed effects, trends, and time-varying conditions, our analysis finds that indeed, short-term increases in house prices lead to a decline in births among non-owners and a net increase among owners. Our estimates suggest that a $10,000 increase in house prices leads to a 2.1 percent increase in births among home owners, and a 0.4 percent decrease among non-owners. At the mean U.S. home ownership rate, our estimates imply that the net effect of a $10,000 increase in house prices is a 0.8 percent increase in births. Given underlying differences in home ownership rates, the predicted net effect of house price changes varies across demographic groups. Our paper provides evidence that homeowners use some of their increased housing wealth, coming from increases in local area house prices, to fund their childbearing goals. In addition, we find that changes in house prices exert a larger effect on current period birth rates than do changes in unemployment rates.

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File URL: http://www.nber.org/papers/w17485.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17485.

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Date of creation: Oct 2011
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Publication status: published as Dettling, Lisa and Melisa S. Kearney. “House Prices and Birth Rates: The Impact of the Real Estate Market on the Decision to Have a Baby,” Journal of Public Economics 110, February 2014: 1-166
Handle: RePEc:nbr:nberwo:17485
Note: CH LS PE
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  1. Karl E. Case & Robert J. Shiller & John M. Quigley, 2001. "Comparing Wealth Effects: The Stock Market Versus the Housing Market," NBER Working Papers 8606, National Bureau of Economic Research, Inc.
  2. John Bound & Harry J. Holzer, 1996. "Demand Shifts, Population Adjustments, and Labor Market Outcomes during the 1980s," NBER Working Papers 5685, National Bureau of Economic Research, Inc.
  3. Michael Lovenheim & Kevin Mumford, 2010. "Do Family Wealth Shocks Affect Fertility Choices? Evidence from the Housing Market Boom and Bust," Discussion Papers 09-004, Stanford Institute for Economic Policy Research.
  4. Alma Cohen & Rajeev Dehejia & Dmitri Romanov, 2007. "Do Financial Incentives Affect Fertility?," NBER Working Papers 13700, National Bureau of Economic Research, Inc.
  5. Dan Black & Natalia Kolesnikova & Seth G. Sanders & Lowell J. Taylor, 2009. "Are children 'normal'?," Working Papers 2008-040, Federal Reserve Bank of St. Louis.
  6. Jason M. Lindo, 2010. "Are Children Really Inferior Goods? Evidence from Displacement-Driven Income Shocks," Journal of Human Resources, University of Wisconsin Press, vol. 45(2).
  7. Kevin Milligan, 2005. "Subsidizing the Stork: New Evidence on Tax Incentives and Fertility," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 539-555, August.
  8. Morris Silver, 1965. "Births, Marriages, and Business Cycles in the United States," Journal of Political Economy, University of Chicago Press, vol. 73, pages 237.
  9. John D. Benjamin & Peter Chinloy & G. Donald Jud, 2004. "Why do Households Concentrate Their Wealth in Housing?," Journal of Real Estate Research, American Real Estate Society, vol. 26(4), pages 329-344.
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