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Title: Fertility Choice in a Life Cycle Model with Idiosyncratic Uninsurable Earnings Risk
Citation Type: Working Paper
Publication Year: 2009
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Abstract: The U.S. fertility rate has declined dramatically over the last three decades, atthe same time as the mean age at rst birth has increased. This paper studies therole of rising earnings uncertainty in explaining these patterns in an Aiyagari-Bewley-Huggett framework augmented to include fertility decisions. Building on Becker andTomes (1976), I model fertility decisions as sequential, irreversible choices over thenumber of children, accompanied by parental choices of time and money invested to-ward improving children's quality. The model is calibrated to replicate cross-sectionalpatterns of fertility, income, consumption, and saving. I nd that young householdspostpone childbearing when income uncertainty is high, preferring to work and to accu-mulate more precautionary savings before starting a family. This birth postponement,in turn, reduces the number of births per household. The model indicates that theactual increases in the U.S. idiosyncratic earnings uncertainty as estimated by Meghirand Pistaferri (2004) can explain about one-half of the decline in fertility and one-thirdof the increase in mean age at rst birth in recent decades, while matching all of theincrease in the mean age at second birth.
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Authors: Sommer, Kamila
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Institution: Georgetown University; FRB Minneapolis
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Publisher Location: Washington, D.C.
Data Collections: IPUMS USA
Topics: Family and Marriage, Fertility and Mortality
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