The Increasing Importance of Economic Conditions on Fertility

This paper investigates whether there has been a fundamental change in the importance of economic conditions on fertility. Through the 1980s econometric studies had found at best a mixed, neutral or negative effect of economic conditions on fertility. Notably, Butz and Ward (1979) concluded that fertility was counter-cyclical, with fertility falling in good times, as the opportunity costs of childbearing rose. More recently, there have been signs that fluctuations in fertility have been pro-cyclical, with good economic times being associated with higher birth rates, and the recent recession with lower birth rates. In this paper, we use panel methods to study short term changes in aggregate fertility and economic measures in OECD countries from 1976-2008. We find indeed that fertility became positively associated with good economic conditions. Furthermore, the increasing importance of economic conditions was detected for both tempo and quantum.