The Cyclicality of Births and Babies’ Health, Revisited: Evidence from Unemployment Insurance

Lisa Dettling and Melissa Schettini Kearney

No 30937, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We revisit the cyclical nature of birth rates and infant health and investigate to what extent the relationship between aggregate labor market conditions and birth outcomes is mitigated by the consumption smoothing income assistance delivered through unemployment insurance (UI). We introduce a novel empirical test of standard neoclassical models of fertility that directly tests the prediction of opposite-signed income and intertemporal substitution effects of business cycles by examining the interaction of the aggregate unemployment rate with a measure of potential income replacement from UI. Our results show that as UI benefit generosity reaches 100 percent income replacement, there is no effect of the unemployment rate on fertility rates. This implies that the well-documented cyclical nature of fertility rates is about access to liquidity. We also provide novel evidence that infant health is countercyclical based on timing of conception, but procyclical based on time in utero. The negative relationship between the in utero aggregate unemployment rate and infant health also disappears when potential UI replacement rates reach 100 percent. Our results indicate that the social insurance provided by UI has a pro-natalist effect and improves babies’ health.

JEL-codes: H51 I18 J11 J13 J18 (search for similar items in EconPapers)
Date: 2023-02
New Economics Papers: this item is included in nep-dem, nep-hea and nep-lab
Note: CH EH LS PE
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