The Demand for and Supply of Births: Fertility and its Life-Cycle Consequences

Abstract

This paper describes and implements a methodology for disentangling
\nempirically in households the biologically-determined supply of births from the
\ndemand for births in order to assess the consequences of exogenous variations
\nin fertility supply for household behavior. The estimation problems arising
\nwhen there is heterogeneity both in preferences for family size and in the
\nbiological capacity to bear children (fecundity) are illustrated with a
\ndynamic optimizing model incorporating stochastic fertility.
\nThe methodology is applied to monthly longitudinal data
\non contraceptive use, fertility, and female labor supply in the United States
\nfrom 1970-75. The empirical results indicate that more than ten percent of
\nthe cross-sectional variation in the number of live births in the U.S. is
\ndue to interhousehold variation in the exogenous supply of births. Biologically determined
\nfertility supply variation also significantly affects married women's
\nlabor supply and earnings. Moreover, use of actual fertility as a proxy for
\nfertility supply results in underestimates of contraceptive effectiveness,
\nand to biased estimates of the consequences of exogenous variations in fertility
\nsupply for couples' choice of contraceptives, for female earnings,
\nand for the labor supply of married women.
\nUniversity of Minnesota,