Household formation rules,fertility and female labour supply: Evidence from post-communist countries

This paper explains how household formation rules affect the fertility and labour supply of women in the Former Soviet Union and neighbouring countries. Women who bear a male first child in countries dominated by traditional, patrilocal households are shown to have substantially lower subsequent fertility from those whose first child is female. Where households are generally nuclear, male first borns do not reduce subsequent fertility. Middle-aged women in more patrilocal contexts often work less if their first child is male, despite reduced fertility and being more likely to reside with a daughter-in-law. In more nuclear contexts, they tend to work more. These findings suggest that household formation rules are strongly related both to women’s demand for sons and to the direction of intergenerational transfers.     

DOES PRO‐POPULATION POLICY RAISE PER CAPITA CONSUMPTION?

We theoretically analyze the effects of a child allowance, an improvement in the efficiency of child rearing and a labour income tax on the fertility rate and per capita consumption. The effects on per capita consumption are opposite in the absence, and the presence, of unemployment. For example, a child allowance urges people to have more children and allocate more labour to child rearing, decreasing labour supply for the purpose of commodity production. Therefore, under full employment it decreases per capita consumption. In the presence of unemployment, however, it reduces the deflationary gap and hence stimulates per capita consumption.     

Pension and child care policies with endogenous fertility

This paper presents an examination of effects of a child allowance on fertility under a pay-as-you-go pension system. In these analyses, the child allowance is financed by taxation of two kinds: an income tax and a consumption tax. Comparative static analyses show that a child allowance financed by income tax revenues can always raise fertility. Similarly with income tax, a child allowance financed by consumption tax can always raise fertility. Furthermore, our paper presents examination of optimal child allowance and transfer for older people.     

Fertility,Female Labor Supply,and Family Policy

The present paper develops an overlapping generations general equilibrium model for Germany in order to study the impact of public policy on household labor supply and fertility decisions. Starting from a benchmark equilibrium which reflects the current German family policy regime we introduce various reforms of the tax and child benefit system and quantify the consequences for birth rates and female labor supply. Our simulations indicate three central results: First, higher transfers to families (either direct, in‐kind or via family splitting) may increase birth rates significantly, but they may come at the cost of lower female employment. Second, the introduction of individual taxation (instead of joint taxation of couples) would increase female employment but might further reduce current birth rates in Germany. Third, it is possible to increase birth rates and female employment rates simultaneously if the government invests in child care facilities for children of all ages.     

The effect of family welfare support on the likelihood of having another child and parents’ labor supply

Governments have recently attempted to reverse the below-replacement fertility rates in Europe by reducing child-rearing costs through child benefits, grants and paid leaves. This article examines the causal effect of family allowances on the likelihood of having another child, and on the extensive and intensive margins of labor supply. Evidence from Switzerland suggests that higher child benefits incentivize parents to have more children but do not affect their employment choice. The effect is larger for low-income families. These findings imply that policies aimed at improving the economic well-being of families are likely to increase fertility rates without distorting labor market outcomes.     

Fertility and female wages: A new link via house prices

The analysis in this paper explains a new link between fertility and female wages that occurs through the effect of house prices. It is well known that higher female wages have an ambiguous effect on fertility: the positive income effect is offset by a negative substitution effect due to the higher opportunity cost of the maternal time required for child-rearing. Here it is shown that housing costs add a new dimension to this relationship. If the housing needs of children are a sufficiently important cost of child-rearing, then other costs of child rearing such as the opportunity cost of maternal time are rendered relatively less important. Hence the negative substitution effect of higher female wages on fertility is weaker, implying that higher female wages are more likely to boost fertility. This effect is stronger when the housing supply elasticity is high since house prices, and hence the costs of children, are kept in check. The analysis here helps to reconcile empirical observations about fertility, female wages and house prices in a number of countries. For governments concerned about low fertility, policies to increase housing supply elasticity in order to keep house prices in check would be helpful.     

Life cycle employment and fertility across institutional environments

In this paper, we formulate a dynamic utility maximization model of female labor force participation and fertility choices and estimate approximate decision rules using data on married women in Italy, Spain and France. The estimated decision rules indicate that first-order state dependence is the most important factor determining female labor supply behavior in all three countries. We also find that cross-country differences in state dependence effects are consistent with the order of country-level measures of labor market flexibility and child care availability. Counterfactual simulations of the model indicate that female employment rates in Italy and Spain could reach EU target levels were French social policies to be adopted in those countries.     

The Relationship between Output and Unemployment with Efficiency Wages

Abstract. We construct a stylised model of the supply side with goods and labour market imperfections to show that an economy can rationally operate at a low-effort state in which the relationship between output and unemployment is positive. We examine data from the G7 countries over 1960–2001 and find that only German data strongly favour a persistent negative relationship between the level of output and rate of unemployment. The consequence of this is that circumstances exist in which market imperfections could pose serious obstacles to the smooth working of expansionary and/or stabilisation policies and a positive demand shock might have adverse effects on employment.     

Parental involvement and Children's human capital: A tax-subsidy experiment

Parental time with children has a significant influence on early childhood development, future accumulation of a wide array of cognitive and non-cognitive skills and the ultimate success of the child. The model presented in this article features endogenous fertility and labour supply while distinguishing between various types of parental time spent with children. We conduct a quantitative analysis to investigate the importance of the role of family for children's skill formation. In the model, parents are subsidized for spending publicly verifiable productive time with their children. Such intervention can significantly enhance the human capital of children, yet it affects the overall labour supply of the primary caretaker in an ambiguous way.     

On the relationship between female labour force participation and fertility in G7 countries: evidence from panel cointegration and Granger causality

This article examines the relationship between the female labour force participation rate and total fertility rate for the G7 countries from 1960 to 2006 using panel unit root, panel cointegration, Granger causality and long-run structural estimation. The article’s main findings are that the female labour force participation rate and total fertility rate are cointegrated for the panel of G7 countries; that long-run Granger causality runs from the total fertility rate to the female labour force participation rate and that a 1% increase in the total fertility rate results in a 0.4% decrease in the female labour force participation rate for the G7 countries.     

Informal work networks

Abstract We present a model of time allocation between formal and informal labour supply, where workers learn of informal job opportunities from their peers. In addition to formal income taxation and enforcement, individuals’ labour supply decisions depend on the number of their peers with informal jobs and the strength of social ties. Workers allocate more time to informal activities when tax enforcement is lax and job information transmission is good. More connected social networks (e.g., wheel, complete) feature lower average income but higher average utility than poorly connected social networks (e.g., star, empty). Average income may be non‐monotonic in tax enforcement.     

Optimal tax progressivity in unionised labour markets: What are the driving forces?

In labour markets with collective wage bargaining higher progressivity of the labour income tax creates a trade-off. On the one hand, wages are lowered and unemployment decreases, on the other hand, the individual labour supply decision is distorted at the hours-of-work margin. The optimal level of tax progressivity within this trade-off is determined using a numerical general equilibrium model with imperfect competition on the goods market, collective wage bargaining and a labour-supply module calibrated to empirically plausible elasticity values. The model is calibrated to macroeconomic and institutional parameters of both the OECD average and a number of individual OECD countries. In most cases the optimal degree of tax progressivity is below the actual level. A decomposition approach shows that the optimal level is increased by high unemployment and by the general tax level.     

Impact of Immigration on Inhabitants' Educational Investments

We examine whether immigration into the labour market of the building and construction (BaC) industry affects enrolment in vocational programmes that teach the skills required in this industry. Results suggest that a higher supply of immigrant labour is associated with lower enrolment into programmes teaching BaC skills. The strength of this relationship increases according to the grades that the students achieved in lower secondary school. This finding indicates that the negative effect of immigration on educational recruitment is mainly caused by students who turn away from these programmes, rather than a reduction in apprenticeship positions offered by employers.     

Energy taxation: Reasons for discriminating in favor of the production sector

If a small open economy wishes to restrict it's greenhouse gas emissions, it has to decide whether to impose uniform taxes on all polluters or to resort to a discriminatory policy. In practice, countries tend to impose higher taxes on households and to tax the industrial sector more leniently. This paper identifies conditions under which this is efficient. It is shown that an efficiency maximizing tax planner discriminates in favor of the production sector if (i) there are restrictions on the taxation of lump-sum income or if (ii) labor supply exerts market power.     

Product cycles, endogenous skill acquisition, and wage inequality

Abstract .  This paper presents an endogenous product cycle overlapping generations model, where the supply of skilled labour is endogenously determined. This is used to examine how production shifts through imitation by developing countries affect the domestic wage differential and supply of skilled labour in developed countries. In the model, production shifts increase the demand for researchers in developed countries and cause higher relative wages for skilled labour: this leads to more individuals acquiring the skills. As a consequence, the model helps to explain the simultaneous increase in the domestic wage gap and in the supply of skilled labour observed in developed countries.     

Optimal Taxation with a Trade-off Between Income and Children

This paper explores the implications of endogenous fertility for optimal redistributive taxation in the presence of a trade-off between labour income and children. The labour supply is a decreasing function of the desired quantity and quality of children. Since children enter into the parent's budget constraint in a nonlinear form, their shadow prices are directly distorted by the income tax rate. It is shown that the substitution effects of the income tax rate on the quantity and quality of children cannot be signed uniquely although the effect on labour supply is negative. The aggregate substitution effect of the income tax rate on the quantity of children plays an important role in the determination of the signs of the income tax and child subsidy rates at a Rawlsian or Benthamite social welfare optimum.
JEL Classification Numbers: H21, J13, J22     

Hidden consequences of a first-born boy for mothers

Women whose first child is a boy work less than women with first-born girls. After a first-born boy the probability that women have more children increases. Higher fertility is a possible explanation for the lower labor supply of mothers.     

Endogenous fertility, international migration and growth

An endogenous growth model with heterogeneous agents and endogenous rates of fertility is developed to study the relationships between population growth, human capital, migration and economic development. A variety of patterns of migration, from the migration of the unskilled to the brain drain is considered, where the decision to migrate reflects the agents’ optimising behaviour. The analysis yields implications which accord with the empirical evidence on the relationships between demography and development. Macroeconomic policy can foster growth by influencing labour mobility through taxation and the provision of public goods such as social infrastructure, sanitation, environmental control and medical research that affect locational preferences and child quality. The author is grateful for the comments of an anonymous referee on an earlier version of the paper. The usual disclaimer applies.     

Bounded rationality,expectations, and child labour

This paper develops a model with overlapping generations, where the household's optimal fertility, child labour, and education decisions depend on the parents’ expectations or beliefs about the return to education. It is shown that there exists a range of parental income where the fertility rate is high and children participate in the labour market and receive an incomplete education if a parent believes the return to education is low. The act of participating in the labour market reduces the child's ability to accumulate human capital; thus, the action of sending a child into the labour market is sufficient to ensure that the parents’ initially pessimistic expectations are fulfilled. It is then shown that a one‐time policy intervention, such as banning child labour and mandatory education, can be enough to move a country from the positive child labour equilibrium to an equilibrium with no child labour.     

Does female schooling reduce fertility? Evidence from Nigeria

The literature generally points to a negative relationship between female education and fertility. Citing this pattern, policymakers have advocated educating girls and young women as a means to reduce population growth and foster sustained economic and social welfare in developing countries. This paper tests whether the relationship between fertility and education is indeed causal by investigating the introduction of universal primary education in Nigeria. Exploiting differences in program exposure by region and age, the paper presents reduced form and instrumental variables estimates of the impact of female education on fertility. The analysis suggests that increasing female education by one year reduces early fertility by 0.26 births.