A cohort perspective of the effect of unemployment on fertility

Héctor Pifarré I Arolas

doi:10.1007/s00148-017-0640-5

Abstract

This work offers an explanation for the apparent contradiction between empirical work that finds a negative relationship between unemployment and fertility, and theoretical work that emphasizes the lower opportunity cost of childbearing while unemployed. I reconcile these perspectives by distinguishing between two forms of unemployment. The first form is structural unemployment, while the second form is cyclical unemployment, a less permanent component of unemployment that is linked to the economic cycle. I apply a cohort-based model to study both effects over the life cycle using panel data methods applied to a sample of developed countries. My results show that higher levels of structural unemployment decrease fertility, but that the effects of cyclical variations in unemployment depend to a large extent on the age at which they are experienced. Cyclical reductions in the unemployment level mostly result in increases in fertility rates. However, for some age groups, positive variations in the cyclical component of unemployment can also have a positive impact on fertility.

Highlights

Two broad perspectives feature in the extensive literature on the relationship between economic conditions and fertility
I have explored the hypothesis of countercyclical fertility by linking the complete fertility and unemployment histories of 12 cohorts in nine developed countries
While the findings of my analysis are only suggestive of the mechanisms behind countercyclical fertility, they show that countercyclical fertility is statistically significant across a variety of specifications and variable definitions

Summary

Introduction

Two broad perspectives feature in the extensive literature on the relationship between economic conditions and fertility. As evidence on fertility-based economic cycles has become more tenuous over time (Poterba 2001 and Abel 2001), a second and dominant perspective that focuses more on the effects of economic conditions on fertility has emerged. This second perspective has gained momentum in part due to the recent economic recession from 2008 to 2009,1 which has sparked a renewed interest in the effects of economic conditions on fertility. The current recession has been exceptionally severe, it started in a period in which fertility rates in developed countries were already low. This coincidence could prove harmful, as the onset of the recession in 2008 may have halted the ongoing recovery of fertility rates (Goldstein et al 2013)

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