Asymmetric Fertility Elasticities

Sam Engle, Chong Pang and Anson Zhou

No 26120, RFBerlin Discussion Paper Series from ROCKWOOL Foundation Berlin (RFBerlin)

Abstract: This paper develops a theory of fertility choice with loss aversion over consumption. Because children compete with consumption for household resources, loss-averse households cut fertility aggressively to protect living standards when adverse shocks push consumption below reference levels, but respond modestly to positive shocks. Cross-country panel data and quasi-experimental evidence support the model's predictions. A calibrated version attributes a substantial share of China's recent fertility decline to slowing income growth activating loss aversion. The findings suggest that pro-natalist policies are more effective during downturns, temporary subsidies may backfire upon withdrawal, and pro-fertility regimes should target higher fertility under income uncertainty.

Keywords: Fertility elasticity; loss aversion; family policy (search for similar items in EconPapers)
JEL-codes: J11 J13 J18 (search for similar items in EconPapers)
Date: 2026-04
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Persistent link: https://EconPapers.repec.org/RePEc:crm:wpaper:26120

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