More Credit, More Babies? Bank Credit Expansion, House Prices, and Fertility

Abstract

This paper examines the causal effect of bank credit expansion on fertility by exploiting exogenous
increases in bank credit supply generated by the U.S. interstate branching deregulation between 1994 and 2005. I employ both traditional and staggered difference-in-difference methods to estimate the causal effect of credit expansion on fertility rates and maternal age. I find that credit expansion reduces fertility rates by 7 percent and increases maternal age by 0.37 percent. I also provide evidence showing that the housing cost effect is the main mechanism behind the fertility response. My findings highlight the importance of financial market policies and housing affordability for demographic outcomes.

Keywords: Bank Branching Deregulation, Credit Expansion, House Prices, Homeownership, Fertility

JEL Classification: J13, G21, R21, R31