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Why did Rich Families Increase their Fertility? Inequality and Marketization of Child Care

Michael Bar (), Moshe Hazan (), Oksana Leukhina (), David Weiss () and Hosny Zoabi ()
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Michael Bar: San Francisco State University

No 2018-22, Working Papers from Federal Reserve Bank of St. Louis

Abstract: A negative relationship between income and fertility has persisted for so long that its existence is often taken for granted. One economic theory builds on this relationship and argues that rising inequality leads to greater differential fertility between rich and poor. We show that the relationship between income and fertility has flattened between 1980 and 2010 in the US, a time of increasing inequality, as high income families increased their fertility. These facts challenge the standard theory. We propose that marketization of parental time costs can explain the changing relationship between income and fertility. We show this result both theoretically and quantitatively, after disciplining the model on US data. We explore implications of changing differential fertility for aggregate human capital. Additionally, policies, such as the minimum wage, that affect the cost of marketization, have a negative effect on the fertility and labor supply of high income women. We end by discussing the insights of this theory to the economics of marital sorting.

Keywords: Income Inequality; Marketization; Differential Fertility; Human Capital; Minimum Wage (search for similar items in EconPapers)
JEL-codes: E24 J13 J24 J31 J38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dem, nep-hrm, nep-lma and nep-mac
Date: 2018-09-25
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DOI: doi.org/10.20955/wp.2018.022

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