Social interactions and fluctuations in birth rates

Abstract

Fluctuations in birth rates in developed countries have been considerably less regular than many explanatory theories suggest. This paper argues that social interaction, i.e., the dependence of individuals' fertility decisions on the fertility behaviour of other population members, is relevant even in developed countries. A formal model for investigating the static and dynamic consequences of social interaction for fertility is developed, and its aggregate implications are tested using a Markov switching regression model. 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. The paper suggests that high birth rates are likely to be followed by spells of low fertility. Transitions from low to high fertility occur at a substantially lower rate than transitions in the opposite direction.