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Do Family Wealth Shocks Affect Fertility Choices? Evidence from the Housing Market Boom and Bust

  • Michael F. Lovenheim
  • Kevin J. Mumford

While there is a great deal of literature focusing on the relationship between income and fertility, little is known about how wealth affects fertility decisions of the household. This paper fills this gap in the literature by investigating how changes in housing wealth affect fertility. In particular, we use the wealth variation supplied by the recent housing boom and bust to generate exogenous variation in household wealth. We first conduct a state-level aggregate analysis to investigate how the birth rate is related to housing prices using differences in the timing and size of the housing market boom and bust across different states over time. We then conduct an analysis using restricted-use data from the Panel Study of Income Dynamics that allows us to track how women’s fertility behavior is related to individual-level housing price growth. The demographic and geographic controls in the PSID allow us to control extensively for any confounding effects driven by household selection across different cities or neighborhoods, and we find that for homeowners, a $10,000 increase in real housing wealth causes a 0.07 percent increase in fertility. We find little effects of MSA-level housing price growth on the fertility of renters, which supports our identification strategy. That increases in housing wealth are strongly associated with increases in fertility is consistent with some recent work showing a positive income effect on births, and our estimates are suggestive that the large recent variation in the housing market could have sizeable demographic effects that are driven by the positive effect of housing wealth on fertility.

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Paper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1228.

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Length: 33 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:pur:prukra:1228
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  1. George B. Roberts, Chairman, Universities-National Bureau Committee for Economic Research, 1960. "Demographic and Economic Change in Developed Countries," NBER Books, National Bureau of Economic Research, Inc, number univ60-2, June.
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  3. Case, Karl E. & Quigley, John M. & Shiller, Robert J., 2005. "Comparing Wealth Effects: The Stock Market versus the Housing Market," Berkeley Program on Housing and Urban Policy, Working Paper Series qt28d3s92s, Berkeley Program on Housing and Urban Policy.
  4. Hurst, Erik & Stafford, Frank, 2004. "Home Is Where the Equity Is: Mortgage Refinancing and Household Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 985-1014, December.
  5. 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).
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  8. Black, Dan A. & Kolesnikova, Natalia & Sanders, Seth G. & Taylor, Lowell J., 2011. "Are Children "Normal"?," IZA Discussion Papers 5959, Institute for the Study of Labor (IZA).
  9. Oded Galor, 2005. "The Demographic Transition and the Emergence of Sustained Economic Growth," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 494-504, 04/05.
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  11. Edward L. Glaeser & Joseph Gyourko & Raven Saks, 2005. "Why Have Housing Prices Gone Up?," NBER Working Papers 11129, National Bureau of Economic Research, Inc.
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  13. Larry E. Jones & Alice Schoonbroodt & Michèle Tertilt, 2010. "Fertility Theories: Can They Explain the Negative Fertility-Income Relationship?," NBER Chapters, in: Demography and the Economy, pages 43-100 National Bureau of Economic Research, Inc.
  14. Kevin Milligan, 2002. "Subsidizing the Stork: New Evidence on Tax Incentives and Fertility," NBER Working Papers 8845, National Bureau of Economic Research, Inc.
  15. Alma Cohen & Rajeev Dehejia & Dmitri Romanov, 2007. "Do Financial Incentives Affect Fertility?," NBER Working Papers 13700, National Bureau of Economic Research, Inc.
  16. Andreas Lehnert, 2004. "Housing, consumption, and credit constraints," Finance and Economics Discussion Series 2004-63, Board of Governors of the Federal Reserve System (U.S.).
  17. Heckman, James J & Walker, James R, 1990. "The Relationship between Wages and Income and the Timing and Spacing of Births: Evidence from Swedish Longitudinal Data," Econometrica, Econometric Society, vol. 58(6), pages 1411-41, November.
  18. Reagan Baughman & Stacy Dickert-Conlin, 2003. "Did Expanding the EITC Promote Motherhood?," American Economic Review, American Economic Association, vol. 93(2), pages 247-251, May.
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  20. Daniel Parent & Ling Wang, 2007. "Tax incentives and fertility in Canada: quantum vs tempo effects," Canadian Journal of Economics, Canadian Economics Association, vol. 40(2), pages 371-400, May.
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