The Effects of Natural Disasters and Economic Volatility on Fertility

This paper examines whether economic or environmental instability affects fertility. My identification strategy uses regional data to exploit the natural variation within each of the two countries I examine: one European country—Italy—and one Asian country—Japan. I use the variance of the detrended wage to measure economic volatility; the crude birth rate to measure demographic risk; and the number and magnitudes of natural disasters to measure environmental instability. According to my results, natural disasters have a significant negative effect on fertility in both countries, while mortality risk and economic volatility have significant negative effects in Italy but no effect in Japan. Thus, instability, particularly that arising from the natural environment, appears to cause a decrease in fertility. JEL Classification: N30, N50, J10 First draft: July 17, 2002 This draft: September 14, 2004 1 Department of Economics, Harvard University; [email protected]. An earlier draft was circulated with the title “Economic, Demographic and Environmental Determinants of Fertility.” I would like to thank Jeffrey Williamson for his advice and guidance throughout this project. I also benefited from discussions with Jerry Green, Bard Harstad, Jason Hwang, Dale Jorgenson, Satomi Kurosu, Ronald Lee, Raven Saks, Robert Stavins, and Alex Wagner. Tommy Bengtsson, Harold Bolitho, Peter Bol, Goran Ekstrom, Brian Farrell, Susan Hanley, Sun Joo Kim, James Z. Lee, Ts’ui-jung Liu, Jane Mangan, Paul Vermouth, and Peter Viechnicki provided invaluable assistance during the data collection process. I received financial support from an EPA Science to Achieve Results (STAR) graduate fellowship, a National Science Foundation (NSF) graduate research fellowship, and a Repsol YPF Harvard Kennedy School Pre-Doctoral Fellowship in energy policy. All errors in this draft are my own.