Fertility, labor force participation, and tastes: An economic psychology perspective

Abstract

Economic and economic psychology models of wife's labor force participation and family size decisions are examined within the context of a marriage cohort. Among other results, it was found that tastes influence the demand for work and number of children, along with traditional economic determinants such as opportunity costs and income. Tastes have an especially strong impact when modeled as unobservables, in order to correct for measurement error. Further, the often observed empirical association between labor force participation and fertility is found to be spurious and not necessarily causal in nature. That is, labor force participation and fertility negatively covary largely as a consequence of common economic and taste antecedents and not due to reciprocal interactions. Hypotheses were tested using a new structural equation methodology.