Adolescent Premarital Childbearing: Do Opportunity Costs Maiter?

This study develops an empirical model of adolescent premarital childbearing which emphasizes the influence of opportunity costs. The model estimates determinants of premarital pregnancy, the choice to abort or carry to term, and whether a marriage occurs before the birth. The sample is from the National Longitudinal Survey of Youth. The long-run opportunity costs are the predicted effects of premarital childbearing on own future wages and welfare benefits. State variables on abortion and family planning policy and availability, which are proxies for the costs of abortion and avoiding pregnancy, represent shortrun costs. For white adolescents, the long-run wage measure has statistically significant effects on abortion and pregnancy outcomes that are consistent with theoretical expectations. Their behavior also is associated with welfare, abortion, and family planning policy variables in directions consistent with an opportunity-cost model of behavior. Black adolescents' behavior shows no association with the opportunity-cost or policy variables. This may be a function of sample size. It may also be that there are important unmeasured racial differences in the factors that influence fertility and marital behavior. ADOLESCENT PREMARITAL CHILDBEARING: DO OPPORTUNITY COSTS MA'ITER? Teenage childbearing emerged as an issue of national importance during the 1980s, and continues to be the focus of confused and heated debate among policymakers, researchers, and the general public. Providers of health and educational services have responded to the public's sense of a crisis in teenage fertility, treating the problem as one of imperfect information or irrational behavior. Sex education, family life classes, and "life option" and self-esteem programs in schools and community centers seek to improve either teens' knowledge of their alternatives or their decisionmaking skills. An alternative, but not necessarily incompatible, approach treats premarital childbearing as a response to the incentives and constraints facing teenagers, particularly black and disadvantaged teenagers. Geronimus (1987) argues: "Policies that do not attempt to alter this social reality, but aim only to affect directly the fertility behavior of those teenagers subject to it, are likely to fail as they are counteracted by the incentives to early childbearing to which these teenagers respond" (p. 266). What are the incentives that encourage some teens to become single parents and deter others? Teenage childbearing has been associated with a number of adverse social and economic consequences, including fewer years of schooling, a higher risk of marital disruption, lower earnings and family income, and a higher risk of poverty and welfare receipt. Care of a young child is a time-consuming responsibility that diverts time and energy away from other activities, including school attendance and, in the shon run, market work. This reallocation of time is likely to have long run consequences, since school and work are investment activities that increase market productivity and wages. Future husband's income may also be affected by early fertility if 2 market productivity and wages. Future husband's income may also be affected by early fertility if the presence of a child born out-of-wedlock, or an early marriage with a high probability of dissolution, alters the pool of potential spouses. Is it possible that these consequences also play crucial causal roles in leading some young women to become, and others to avoid becoming, unwed mothers? Other things equal, perhaps girls who perceive that early motherhood will entail little loss of long run earnings and marriage opportunities see little reason to avoid becoming an adolescent parent, while those who expect early motherhood to greatly damage their labor market and marriage prospects will take steps to avoid this fate. Anderson's (1989) ethnographic research leads him to conclude "middle-class youths take a strong interest in their future and know what a pregnancy can do to derail that future. In contrast, the ghetto adolescent sees no future to derail, no hope for a tomorrow very different from today, hence, little to lose by having an out-of-wedlock child" (p. 76). Wilson (1987) argues that rates of black premarital childbearing are high, in part, because adolescent black females face such poor marriage opportunities that they sacrifice little in the way of long run income by not postponing motherhood. Set against this low cost are the benefits of childbearing, which may include acceptance as an adult member of the community. This perspective on the determinants of early and premarital childbearing is the "opportunity cost" or "nothing to lose" hypothesis. The opportunity cost hypothesis is intuitively plausible and consistent with some anecdotal and journalistic evidence (e.g.,Dash, 1989), but has just begun to receive careful study. Lundberg and Plotnick's (1990) estimates of the future wage losses associated with early and premarital childbearing show moderate reductions in future wages for white teenage mothers, but none for blacks. In fact, there are significant wage premia for black teenage mothers from disadvantaged 3 backgrounds. These findings are consistent with the observed racial and socioeconomic patterns of premarital childbearing. While the research literature on adolescent sexual behavior, pregnancy, and childbearing is extensive (see Hofferth and Hayes, 1987, for a comprehensive review), few studies have adopted an economic approach.' Most empirical studies of premarital childbearing have been grounded in sociological and psychological models of behavior. They focus on the effects of personal and family background variables rather than cost or policy variables.' Duncan and Hoffman (1990) begin a more sophisticated exploration of the economic approach. They find that a predicted measure of taxable family income in early adulthood affects the probability that a black teenager will have a premarital birth and receive AFDC. They do not, however, find a significant effect of AFDC benefits on this outcome. Their results suggest that further examination of opportunity costs is likely to be fruitful and informative for policy purposes. We have developed an empirical model of premarital childbearing which emphasizes the influence of opportunity costs. The model explicitly recognizes that a teenager's route to single motherhood involves a multistage process of choices. This process is marked by three major decision points which fall logically into a hierarchical order: becoming pregnant; given a pregnancy, the choice to abort or carry to term; and given the choice to carry to term, the outcome of having the birth premaritally or marrying sometime before the birth.3 We examine separately the factors affecting the probability of a premarital pregnancy, and those affecting its resolution. Figure 1 illustrates the sequence of choices and outcomes we analyze in this paper. Since the abortion decision is conditional on the occurrence of a pregnancy, and the marriage decision is conditional on continuing the pregnancy, the three stages of the decision process must be jointly estimated. A three stage nested logit model is a natural candidate for estimating the determinants