The economic determinants of fertility: Evidence from the great recession

Fertility in the U.S. (and most developed nations) has generally been trending downwards over the past few decades.  Superimposed on this declining longer-term trend are short-term fluctuations, which may be related to the business cycle.  Several studies have shown that these shorter-term trends may have mimicked the short-term trends of the US economy since the early 1900s.  An economic recession has historically triggered a decline in fertility while a strong economy yields a fertility increase. This study aims to answer two inter-related questions: how exactly do economic conditions impact fertility in the United States?  Is fertility among certain socio-demographic profiles more likely to be impacted by economic conditions? Economic theory suggests a weaker economy may have both positive as well as negative effects on fertility decisions, associated with both a reduced income effect as well as an easing of time constraints (and lower opportunity cost of time). Furthermore, with respect to teenage fertility, there may be further mechanism at play associated with shifts in parental supervision and teenage engagement in risky sexual behaviors

The study uses state-level data on fertility rates across various profiles (total fertility; teenage fertility; fertility among married and unmarried women; fertility among young adult women) spanning 1990 through 2009, which includes three economic downturns – the relatively mild 1990-1991 and 2000-2001 recessions and the recent Great Recession.  Regression models with state and time fixed effects are estimated to study how various fertility rates respond to labor market conditions, as proxied by various state-level employment statistics.  In addition, the models control for a rich set of state-level observable factors relating to socio-demographics and confounding trends.

The results suggest that a recessionary environment generally has a negative effect on fertility across all profiles.  Trends in fertility have implications for the workforce as well as for funding of Social Security.  This study helps towards the understanding of short-term fluctuations in fertility as they may be related to the economy.  Furthermore, the study also suggests that the economy may have far-reaching effects on factors besides just income and employment.  We also find significant decreases in teenage birthrates, associated with the recent downturn, which suggest some positive spillover benefits since teenage pregnancy and parenthood are generally associated with lower human capital investments, lower income trajectories, and adverse health behaviors and outcomes over the life cycle.