Abstract
The “old-age security” hypotheses propose that financial market can affect individuals’ decision to have less or more children. In previous literature, children are considered an asset and investment at low level of financial development that could bring returns and security during old age. Nevertheless, at higher level of financial development, individuals have more access to fund and opportunity for investment during old age and as a result the demand for children is less. Furthermore, increase in female labour participation rate in the economic sectors will also discourage them to have more children. The development of commercial bank and non-banking financial institutions (NBFIs) has broadened credit accessibility and investment opportunity to household over the last decades. Well-developed financial system facilitates firms to access to the credit market and enhanced production efficiency and promote increases in wages in the modern market. Household have choice to move from traditional market (low wages, high fertility rate) to work in modern sector (high wages, low fertility rate). The purpose of the study is to investigate the impact of financial development on fertility for selected developed and developing countries. We employ generalized method of moment (GMM) model using annual data from 2005 to 2011. Our results found that financial development and fertility has inverse relationship for both developed and developing countries.
Highlights
Fertility behaviour and financial development have seen intense changes in recent decades, as both demonstrated distinctive patterns
Does fertility is really matter of well-developed financial system that is overlooked among researchers? The purpose of the study is to examine the effect of financial development on total fertility rate in both developed and developing countries for the period from 2005 to 2011
It indicated that empirical results supported the hypothesis that countries with higher access to financial development tend to experience lower fertility rate
Summary
Fertility behaviour and financial development have seen intense changes in recent decades, as both demonstrated distinctive patterns. The growth in financial development (Figure 2) and welldeveloped financial system supports firm accessibilities to credit market and encourages production efficiency while contributing to salary rise in wages in the modern market This often provides parents with the opportunity to work in the modern sectors (high wages, low fertility rate) instead of retaining traditional sector (low wages, high fertility rate) (Habibullah, Farzaneh and Haji Din, 2016; Varvarigos and Arsenis, 2015). Looking at the current trends, the household take loans to overcome the financial and economic difficulties (Anderloni, Bacchiocchi, & Vandone, 2012) Instead of smoothing their consumption, they lose their savings which may lead to financial vulnerability (Abid and Mohd Shafiai, 2018). We highlight on the role of financial development as an important factor for declining fertility
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More From: International Journal of Academic Research in Business and Social Sciences
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