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Are Children Really Inferior Goods?: Evidence from Displacement-Driven Income Shocks

Are Children Really Inferior Goods?: Evidence from Displacement-Driven Income Shocks Abstract: This paper explores the causal link between income and fertility by analyzing women's fertility response to the large and permanent income shock generated by a husband's job displacement. I find that the shock reduces total fertility, suggesting that the causal effect of income on fertility is positive. A model that incorporates the time cost of children and assortative matching of spouses can simultaneously explain this result and the negative cross-sectional relationship. I also find that a husband's displacement accelerates childbearing, which is consistent with lifecycle models of fertility in which the incentive to delay is driven by expected earnings growth. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Human Resources University of Wisconsin Press

Are Children Really Inferior Goods?: Evidence from Displacement-Driven Income Shocks

Journal of Human Resources , Volume 45 (2) – Apr 4, 2010

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Publisher
University of Wisconsin Press
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Copyright © University of Wisconsin Press
ISSN
1548-8004
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Abstract

Abstract: This paper explores the causal link between income and fertility by analyzing women's fertility response to the large and permanent income shock generated by a husband's job displacement. I find that the shock reduces total fertility, suggesting that the causal effect of income on fertility is positive. A model that incorporates the time cost of children and assortative matching of spouses can simultaneously explain this result and the negative cross-sectional relationship. I also find that a husband's displacement accelerates childbearing, which is consistent with lifecycle models of fertility in which the incentive to delay is driven by expected earnings growth.

Journal

Journal of Human ResourcesUniversity of Wisconsin Press

Published: Apr 4, 2010

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