Economics of Fertility

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Economics of Fertility

• Chapter 5

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Economics of Fertility

• 1960s about 4 million births in the US
• Nearly 1 out of every 8 women gave birth between
  the ages of 15 and 44
• Nearly 1 in 4 between the ages of 20 to 24
• In 2000 there was about 4 million births in the
  US
• But only 1 our of every 16 in the 15 to 44

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Nassau William Senior

• September 26, 1790 - June 4, 1864

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Nassau William Senior

• THE FOUR POSTULATES
• That every man desires to obtain wealth with as
  little sacrifice as possible
• That the population of the world, or in other
  words, the number of persons inhabiting it, is
  limited only by a fear of a deficiency of those
  articles of wealth which the habits of the
  individuals of each class of its inhabitants lead
  them to require

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THE FOUR POSTULATES

• That the powers of labour, and of other
  instruments which produce wealth, may be
  indefinitely increased by using their products as
  the means of further production.
• That, agricultural skill remaining the same,
  additional labour employed on the land within a
  given district produces in general a less
  proportionate return.

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Thomas Robert Malthus

• February 13, 1766-December 29, 1834

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Thomas Robert Malthus

• An Essay on the Principle of Population, as it
  affects the Future Improvement of Society, with
  Remarks on the Speculations of Mr Godwin, M.
  Condorcet and Other Writers, anonymous (London,
  J. Johnson, 1798)

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Thomas Robert Malthus

• Positive Checks
• War
• Famine
• Pestilence

• Preventive Checks
• Moral Restraint
• Contraception
• Abortion

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Economics of Fertility

• Was introduced by Malthus to economics and his
  basic tenet was that

• Population grows at a geometric rate, food
  production grew at an arithmetic rate

Population
Growth rate
Food
Time
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Fertility in Modern Economics

• Once again,
• Gary Becker
• Demography
• Study of population

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Terms

• Birth Rate
• Number of births in a year (or given period)
  divided by the total population
• In 2001, 4.03 million births
• 285 million people

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Birth Rate

• Normally based on 1,000 people
• Hence, birth rate for the U.S. in 2001 was
• 14.1 per 1000 population
• The per 1000 can be skipped since it is generally
  understood to be such

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Natural Rate of Population

• The natural rate of population is defined as
• Birth rate Death Rate
• Where death rate is constructed similar to birth
  rate

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Birth Rate vs. Fertility Rate

• Birth Rate is based on whole population
• Fertility rate is based on at-risk population
• Thus, fertility rate can be constructed based on
  women age 15 to 44.

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Fertility Rate

• In 2001 the fertility rate in the U.S. was 65.3
  per 1000
• An approximation can be obtained by
• Multiply by 2 the birth rate
• 14.1 X 2 28.1 (account for about 50 being
  male)
• 28.1 X 2.3 64.63 (for about little more than
  50 of the population of female population being
  under 15 or older than 44

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Fertility Rate

• Age specific
• Non-marital fertility rates
• Sub groups
• By race
• Ethnicity
• etc

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Total Fertility Rate

• Total Fertility Rate (TFR)
• TFR 5 (FR10-14 FR15-19 FR20-24
• FR45-49)
• In 2001 in the US the TFR was 2034

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Zero Population Growth

• Zero Population Growth (ZPG)
• ZPG is obtained when TFR 2130
• This is because 50 births are male
• And some women either die or do not have
  children, hence TFR gt 2000
• In the US ZPG lt 0

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MEASURES OF US FERTILITY, 2001
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Baby Boom vs. Baby Bust US FERTILITY RATE AND
TOTAL BIRTHS, 1940-2001
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US FERTILITY RATE BY RACE AND ETHNICITY, 2001
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BIRTHS PER WOMAN, SELECTED EUROPEAN COUNTRIES,
1970 AND 1995
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FertilityModern Economic Approach

• Preferences
• Demand for Child Services
• Quantity
• Quality
• U U (CS, A)
• where A are all other goods

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FertilityModern Economic Approach

• Production
• Child Services production function
• CS F(T,Z)
• Where T is the Time involved and
• Z the cost of purchasing things for them

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FertilityModern Economic Approach

• COST
• Opportunity Cost
• CCS C( WM, WF, PZ )
• Changes in Costs
• ? PCS / ? WM gt 0
• ? PCS / ? WF gt 0
• ? PCS / ? PZ gt 0

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FertilityModern Economic Approach

• Price
• PCS ? CCS C( WM, WF, PZ )
• Full Income
• YF ( WM X T ) ( WF X T) V
• DEMAND FOR CHILDREN
• CS D (PCS, PA, YF, Preferences)

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FertilityModern Economic ApproachComparative
Statics

• A Change in Full Income Effects
• Income Effect ? ? CS / ? YF gt 0
• A Change in the Wage Rate
• Substitution Effect ? ? CS / ? WF lt 0
• Assuming constant YF

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HOW AN INCREASE IN THE WAGE RATE AFFECTS THE
AMOUNT OF CHILD SERVICES DEMANDED
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THE EFFECT OF AN INCREASE IN THE WAGE RATE ON THE
QUANTITY AND QUALITY OF CHILDREN
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THE EFFECT OF AN INCREASE IN THE WAGE RATE ON THE
QUANTITY AND QUALITY OF CHILDREN

• ? PL / ? N gt 0
• ? PN / ? L gt 0

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THE IMPACT OF WAGES ON THE PRICE OF CHILD
SERVICES AND FULL INCOME