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Is the Market Pronatalist? Inequality, Differential Fertility, and Growth Revisited

68 Pages Posted: 23 Oct 2017  

Michael Bar

San Francisco State University

Moshe Hazan

Tel Aviv University - Eitan Berglas School of Economics; Centre for Economic Policy Research (CEPR)

Oksana Leukhina

University of Washington

Hosny Zoabi

New Economic School (NES)

Date Written: October 2017

Abstract

Recent public discussion has focused on inequality and social justice, while economists have looked at inequality's adverse effects on economic growth. One economic theory builds on the empirically negative relationship between income and fertility observed in the post demographic transition era. It argues that rising inequality leads to greater differential fertility -- the fertility gap between rich and poor. In turn, greater differential fertility lowers the average education level, as the poor invest less in the education of their children. We show that the relationship between income and fertility has flattened between 1980 and 2010 in the US, a time of increasing inequality, as the rich 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. Without marketization, the impact of inequality on education through differential fertility is reversed. Policies, such as the minimum wage, that affect the cost of marketization, have a large effect on the fertility and labor supply of high income women. We apply the insights of this theory to the literatures of the economics of childlessness and marital sorting.

Keywords: Differential Fertility, economic growth., Human Capital, Income inequality, Marketization

JEL Classification: E24, J13, J24, O40

Suggested Citation

Bar, Michael and Hazan, Moshe and Leukhina, Oksana and Zoabi, Hosny, Is the Market Pronatalist? Inequality, Differential Fertility, and Growth Revisited (October 2017). CEPR Discussion Paper No. DP12376. Available at SSRN: https://ssrn.com/abstract=3057290

Michael Bar (Contact Author)

San Francisco State University ( email )

1600 Holloway Avenue
San Francisco, CA 94132
United States

HOME PAGE: http://bss.sfsu.edu/mbar/index.htm

Moshe Hazan

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel

HOME PAGE: http://moshehazan.weebly.com/

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Oksana Leukhina

University of Washington ( email )

Seattle, WA 98195
United States

Hosny Zoabi

New Economic School (NES) ( email )

100A Novaya Street
Moscow, Skolkovo 143026
Russia

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