Does Economic Uncertainty Have an Impact on Decisions to Bear Children? Evidence from Eastern Germany

28 Pages Posted: 13 Nov 2002

See all articles by Sumon K. Bhaumik

Sumon K. Bhaumik

Aston University - Aston Business School; Institute for the Study of Labor (IZA); University of Michigan at Ann Arbor - Stephen M. Ross School of Business, William Davidson Institute

Jeffrey B. Nugent

University of Southern California - Department of Economics

Date Written: July 2002

Abstract

Economic agents routinely face various types of economic uncertainty. Seldom have these various forms of uncertainty manifested themselves more sharply than in the transition economies of Central and Eastern Europe. In East Germany, the transition was especially rapid and sharp since East Germany virtually over night made the transition from the Eastern European system to the market economy of Western Germany. Uncertainties increased and many institutional and behavioral adjustments took place in a concentrated period of time. Among the latter was a sharp fall in fertility rates, leading to a growing literature on the explanation for this decline. This paper focuses directly on the link between uncertainty and childbearing decisions and examines the link at the micro level. It develops a stylized overlapping generations model showing that the relationship between economic uncertainty and childbearing decisions is not necessarily monotonic, and hence that the aforementioned inverse relationship is merely a testable hypothesis. It then uses GSOEP data for 1992 and 1996 to estimate the nature of this relationship, and concludes that while this relationship was indeed negative for East German women during these two years, the nature of uncertainty affecting their childbearing decisions differed across the years.

Keywords: economic uncertainty, fertility, childbearing decisions, transition

JEL Classification: D1, D81, J13, J22, P36

Suggested Citation

Bhaumik, Sumon K. and Bhaumik, Sumon K. and Nugent, Jeffrey B., Does Economic Uncertainty Have an Impact on Decisions to Bear Children? Evidence from Eastern Germany (July 2002). Available at SSRN: https://ssrn.com/abstract=323592 or http://dx.doi.org/10.2139/ssrn.323592

Sumon K. Bhaumik (Contact Author)

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, West Midlands B47ET
United Kingdom

Institute for the Study of Labor (IZA) ( email )

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

University of Michigan at Ann Arbor - Stephen M. Ross School of Business, William Davidson Institute

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

Jeffrey B. Nugent

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States
510-740-2107 (Phone)
510-740-8543 (Fax)

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