Social Interactions and Fluctuations in Birth Rates

Abstract

AbstractShows that the relevance of social interaction is not restricted to developing countries with relatively high levels of fertility. In particular, fluctuations in birth rates in developed countries have been considerably less regular than many explanatory theories suggest. This chapter argues that social interaction is relevant even in developed countries, where increased individualism has been associated with changing demographic behaviour. The analysis shows that social interaction can emerge in both market and non‐market situations, ranging from the evolution of social norms and values to imperfections in the labour market. A formal model for investigating the dynamic consequences of social interaction in developed countries is developed, and its aggregate implications are tested using a Markov switching regression model applied to net reproduction rates since 1930. The findings show that social interaction can lead to fluctuations in birth rates that are swift and difficult to foresee, and that these fluctuations are likely to be asymmetric: spells of low fertility have a considerably higher persistence than spells of high fertility.