Do Family Wealth Shocks Affect Fertility Choices? Evidence from the Housing Market Boom and Bust

32 Pages Posted: 1 Feb 2010 Last revised: 29 Apr 2010

See all articles by Michael Lovenheim

Michael Lovenheim

Cornell University - Department of Policy Analysis and Management; National Bureau of Economic Research (NBER)

Kevin J. Mumford

Purdue University

Date Written: January 1, 2010

Abstract

While there is a great deal of literature focusing on the relationship between income and fertility, little is known about how wealth affects fertility decisions of the household. This paper fills this gap in the literature by investigating how changes in housing wealth affect fertility. In particular, we use the wealth variation supplied by the recent housing boom and bust to generate exogenous variation in household wealth. We first conduct a state-level aggregate analysis to investigate how the birth rate is related to housing prices using differences in the timing and size of the housing market boom and bust across different states over time. We then conduct an analysis using restricted-use data from the Panel Study of Income Dynamics that allows us to track how women’s fertility behavior is related to individual-level housing price growth. The demographic and geographic controls in the PSID allow us to control extensively for any confounding effects driven by household selection across different cities or neighborhoods, and we find that for homeowners, a $10,000 increase in real housing wealth causes a 0.07 percent increase in fertility. We find little effects of MSA-level housing price growth on the fertility of renters, which supports our identification strategy. That increases in housing wealth are strongly associated with increases in fertility is consistent with some recent work showing a positive income effect on births, and our estimates are suggestive that the large recent variation in the housing market could have sizeable demographic effects that are driven by the positive effect of housing wealth on fertility.

Keywords: Fertility, Wealth, Housing Market

JEL Classification: J13, R2

Suggested Citation

Lovenheim, Michael and Mumford, Kevin J., Do Family Wealth Shocks Affect Fertility Choices? Evidence from the Housing Market Boom and Bust (January 1, 2010). Available at SSRN: https://ssrn.com/abstract=1544607 or http://dx.doi.org/10.2139/ssrn.1544607

Michael Lovenheim

Cornell University - Department of Policy Analysis and Management ( email )

Ithaca, NY
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kevin J. Mumford (Contact Author)

Purdue University ( email )

West Lafayette, IN 47907-1310
United States
7654966773 (Phone)
7654967434 (Fax)

HOME PAGE: http://www.mgmt.purdue.edu/faculty/kjmumfor/home.asp

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