Does Fertility Respond to Economic Incentives? and does it matter?

Transcription

1 Does Fertility Respond to Economic Incentives? and does it matter? David de la Croix Univ. cath. Louvain (UCL) Poznań, May 2015

2 What does govern fertility behavior? ex: having kids or not, number of kids, with whom, at which age... Two competing views: Incentives (choice - objective and constraints) vs Norms (culture, social pressure,...) Giving an answer to this question matters for effectiveness of policy 2 / 42

3 Demographic Economics Economic incentives Fertility Mortality Migration Economic Performance Growth and Inequality Migration clearly depends on wages abroad vs wages home Mortality depends on wealth of people and medical effectiveness But what about fertility? 3 / 42

4 Map Facts & Explanations of the secular decline in fertility Arguments in favor of fertility as reacting to economic incentives Policy consequences for inequality, fiscal policy, education 4 / 42

5 Facts about Fertility Fact 1: In all species, when resources are more abundant, reproduction increases. This is true for plants, animals, and humans before the industrial revolution. Fact 2: Before the industrial revolution, the rich had more surviving children than the poor. Fact 3: The transition from stagnation to economic growth is accompanied by a demographic transition from high to low fertility. Fact 4: Now, both within and across countries, rich and educated mothers have less children than poor and unskilled ones. 5 / 42

6 The demographic transition 6 / 42

7 The demographic transition in Poland CBR Gdansk CDR Gdansk CBR Russian occupation CDR Russian occupation 10 CBR Austrian occupation CDR Austrian occupation CBR Prussian occupation CDR Prussian occupation CBR Poland CDR Poland Thanks: Michal Burzynski 7 / 42

8 Reasons for the decline in fertility (1) Demographers would stress: Contraception: Better contraception technology. But how large is the gap between desired and effective fertility? Mortality: Lower child mortality may imply lower birth, to get the same number of surviving children (child-replacement hypothesis) Culture: Change in cultural norms (drops in fertility across Europe often followed linguistic and religious contours) Gender: Women emancipation 8 / 42

9 Reasons for the decline in fertility (2) Economists would stress: Mortality: Same mechanism as demographers Old-age support: Children as a way to save resources for the future and to obtain some support when old. Declines with pension systems. Ban on child labor: Reduces the return from children Parents education: Opportunity cost of child-rearing time is high for high income/education mothers Return to education: Industrial revolution accompanied by a rise in the skill premium (Galor). Gender empowerment: Together with unequal share of cost of childrearing 9 / 42

10 Normalized indexes Best Explanation difficult to identify. ex: US Inverse of total fertility rate (white) Years 10 / 42

11 Normalized indexes Best Explanation difficult to identify Inverse of total fertility rate (white) Gross domestic product per capita Years 11 / 42

12 Normalized indexes Best Explanation difficult to identify Inverse of total fertility rate (white) Gross domestic product per capita Average years of education per person employed Years 12 / 42

13 Normalized indexes Best Explanation difficult to identify Inverse of total fertility rate (white) Gross domestic product per capita Average years of education per person employed Infant survival rate (white) Years 13 / 42

14 Normalized indexes Best Explanation difficult to identify Inverse of total fertility rate (white) Gross domestic product per capita Average years of education per person employed Infant survival rate (white) Contraception effectiveness (annual success rate) Years 14 / 42

15 Quality - Quantity Tradeoff Model Most economic models are based on the QQ model In the budget constraint: Total cost of children = number spending on quality (education+health) When number of children (quantity) becomes too costly, or if quality becomes more profitable parents may want to invest more in the quality of a small number of children. Becker. Also across species in natural world (elephant vs invertebrates). 15 / 42

16 Baby elephant vs tadpoles 16 / 42

17 QQ tradeoff Education spending per child (in logs) vs # children per parent 17 / 42

18 Differential fertility QQ account for fertility over time in the demographic transition, but also for fertility rates in the cross-section of a given country. Since for educated women the opportunity cost of child-rearing time is high, they prefer to invest in the quality of a small number of children. For less educated women, the opportunity cost of raising children is low, while providing education is expensive relative to their income. They would therefore prefer to have many children, but invest little in the education of each child. Look at fertility by education level of parents may help to identify the important determinants of fertility 18 / 42

19 Differential fertility in Poland from Zuzanna Brzozowska (2013) 19 / 42

20 The decline in fertility together with differential fertility in the US 20 / 42

21 Interaction between Gender Power and ChildRearing Costs Assumption: If fertility results from a bargaining within the family it will depend on women s rights (important for outside option - case of disagreement) women s education (opportunity cost of childrearing increases) sharing the tasks within the household If women are educated but task sharing remains very unequal, they will disagree to have many children 21 / 42

22 Do people really choose their number of children?? Surveys Common Sense History Childlessness 22 / 42

23 1. Surveys 1. Surveys (Pritchett 1994) Ninety percent of the differences across countries in total fertility rates are accounted for solely by differences in women s reported desired fertility. 23 / 42

24 probability of not controlling fertility % women with unwanted birth (Baudin, de la Croix, Gobbi, 2015) Built from Demographic & Health Survey - married women Assumption: a woman does not control her fertility if: (completed fertility ideal fertility) > 1 she believes husband did not want more children than her Rwanda Senegal years of schooling 24 / 42

25 2. Common sense Having one more child is a huge investment Similar in cost to buying a small house (Cigno) 25 / 42

26 Good cost + time cost Cumulative hours of child care that the wife devotes: (from time use survey, USA) 1 kid family: kids family: kids family: Husbands time From Cordoba - Ripoll (2015): 26 / 42

27 3. Historical data Look at forerunners in fertility decline Fertility started to decline in some European cities as early as in the 18th century Because some incentives changed in cities? Historical data - Rouen (Bardet) notables merchants craftsmen workmen Fertility per women Similar trends in Geneva ( ) 27 / 42

28 4. Childlessness There is a risk for a couple to be sterile - between 2% and 4% Observed % of childless couples is usually above this level. On recent data, the childlessness rate increases sharply with education of the mother Makes sense as opportunity cost of kids increase with education Part of it is also delayed fertility (for economic reasons) ending in sterility 28 / 42

29 Childlessness in the US, Census 1990, women aged 45+ from Baudin, de la Croix, Gobbi, AER, 2015: singles married / 42

30 Does it matter if fertility depends on incentives? Policy implications: for inequality for public vs private education for population races for pro-natalist or anti-natalist policy 30 / 42

31 Inequality Inequality is usually found bad for growth Many channels are invoked: political economy, sociopolitical unrest, borrowing constraints... One neglected channel: differential fertility We show it is an important one If inequality increases, rich are richer, have fewer highly educated children poor are poorer, still have many uneducated children average human capital decreases in the future 31 / 42

32 Initial effect of inequality Endogenous Fertility Exogenous Fertility σ 2 g 0 N 0 I 0 D 0 g 0 N 0 I 0 D % 0.00% % 0% % 0.66% % 0% % 1.08% % 0% % 1.71% % 0% I 0 : initial Gini on earnings. D 0 : initial fertility differential from De la Croix and Doepke, AER / 42

33 Growth Inequality and Growth Gini / 42

34 Education policy Literature with exo fertility says public schooling is bad for growth With endo fertility: Fertility differentials between rich and poor are bad for growth They are related to private investment in quality It may disappear with (free) public schooling That can be good for growth. 34 / 42

35 PISA for Brazil and S. Korea Country social % in priv. fertility status schools Brazil % % % % 2.86 S. Korea % % % % 2.20 A more egalitarian education system (or society) lowers fertility differentials between rich and poor 35 / 42

36 Additional effect of public education Differential fertility centrifugal force: higher reproduction by low-skilled people increase the relative number of the poor. Public education offsets this centrifugal force. Same argument could be applied in deeply divided countries (because of different ethnic groups, religions,...) 36 / 42

37 Conclusion about Public Education 1. Public schooling distorts the fertility and education choice of parents: parents increase fertility once education is provided for free. This leads to lower growth in the long-run. 2. When there is inequality, the comparison of growth rates can switch in favor of public education, because of differential fertility. 3. With private education, differential-fertility can result in a diverging income distribution. This divergence can be prevented by a public education. 37 / 42

38 Fertility as a strategic variable Suppose a deeply divided society, e.g. by ethnic groups. Political power is often strongly increasing in the size of the group. This provides incentives to have a high fertility norm, for the next generation to regain power. Example of Easter Island - population race between clans - environmental collapse. Current examples: Palestinians - Orthodox Jewish. Extensions: Education race - Cast system in India. 38 / 42

39 Population policy: pro- vs anti-natalism [Sweet Achievement] 39 / 42

40 Glory to the Mother Heroine! Your country needs your heroic achievements 40 / 42

41 Pro-natalist policy often combines incentives with norms Putin s policy: Incentives: Child benefits, longer maternity leaves, etc... Norms: Dubbing mothers with large families Hero Mothers (+ medals) Unclassifiable: Day of conception on Sept 12, with work stopping at noon to encourage people to copulate 41 / 42

42 Conclusion Population policy can be effective, like the Chinese one child policy but accompanied / accelerated an inevitable transition Can it be strong enough to reverse cultural or economic trends? e.g. if men still do no participate in child rearing (Russia?) Lesson from today: Pro-natalist policy may backfire on quality of children May be ineffective in the face of gender imbalance within couples 42 / 42