Fertility choice and economic growth: Empirical evidence from the U.S.

This paper provides empirical evidence to support the proposition of Barro and Becker 1989] that fertility depends positively on the world's long-term real interest rates and negatively on real wages in an economy linked to an international capital market. The empirical evidence suggests that there is no long-run relationship among fertility choice, real wages, long-term real interest rates, and output growth in the U.S. over the period 1960–95. However, when estimating a VAR model and employing the variance decomposition analysis and the impulse response functions, the empirical results support the endogeneity of fertility choice and the proposition that real wages, long-term real interest rates, and output growth is related to changes in fertility choice. The empirical results have important policy implications and provide an explanation for the decline of fertility in Western countries mainly in the last three decades.The views expressed in this paper are those of the authors and not those of the Bank of Greece.