Why Did Rich Families Increase Their Fertility? Inequality and Marketization of Child Care

61 Pages Posted: 2 Oct 2018 Last revised: 7 Jan 2019

See all articles by Michael Bar

Michael Bar

San Francisco State University

Moshe Hazan

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

Oksana Leukhina

Federal Reserve Bank of St Louis

David Weiss

Tel Aviv University - Eitan Berglas School of Economics

Hosny Zoabi

New Economic School (NES)

Date Written: 2018-09-25

Abstract

A negative relationship between income and fertility has persisted for so long that its existence is often taken for granted. One economic theory builds on this relationship and argues that rising inequality leads to greater differential fertility between rich and poor. We show that the relationship between income and fertility has flattened between 1980 and 2010 in the US, a time of increasing inequality, as high income families 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. We explore implications of changing differential fertility for aggregate human capital. Additionally, policies, such as the minimum wage, that affect the cost of marketization, have a negative effect on the fertility and labor supply of high income women. We end by discussing the insights of this theory to the economics of marital sorting.

Keywords: Income Inequality, Marketization, Differential Fertility, Human Capital, Minimum Wage

JEL Classification: E24, J13, J24, J31, J38

Suggested Citation

Bar, Michael and Hazan, Moshe and Leukhina, Oksana and Weiss, David and Zoabi, Hosny, Why Did Rich Families Increase Their Fertility? Inequality and Marketization of Child Care (2018-09-25). FRB St. Louis Working Paper No. 2018-22. Available at SSRN: https://ssrn.com/abstract=3258972 or http://dx.doi.org/doi.org/10.20955/wp.2018.022

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)

London
United Kingdom

Oksana Leukhina

Federal Reserve Bank of St Louis ( email )

P.O. Box 442
St. Louis, MO 63166-0442
United States

David Weiss

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

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

Hosny Zoabi

New Economic School (NES) ( email )

100A Novaya Street
Moscow, Skolkovo 143026
Russia

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