Women’s Wages and Fertility Revisited. Evidence from a Country with Good Data

Tom Kornstad, Research Dep., Statistics Norway

According to Beckers’ New Home Economics (NHE) females' wage rate is one of the most important determinants of fertility as it reflects the opportunity cost of having children. The prediction from theory of a negative effect of female wages on fertility has been tested in a number of studies, but the results are diverging. We contribute with new evidence based on registry data covering all Norwegian women born 1955–74 and a simultaneous hazard model of transitions to first, second and third birth. So far we have found a U-shaped relationship between hourly wages and the log hazard for all the four cohorts we are studying, however varying in strength and across parity. However, as women are located at different points on the U-shaped curve, it hard to summarize the total effect of wages on womens' fertility. To fully understand this relationship, it would be preferable to use the estimated model for simulations. Then we can quantify the relationship between womens' ages and their probability of giving birth to child. We intend to study the following situations: 1) Suppose all women get a 10 perecent increase in the wage rate. What are the effects on transitions to first, second and third birth? 2) One might suspect that the effect of wage changes is dependent on the woman's location in the wage distribution. For instance, the effect might differ for women in the lower part of the wage distribution compared to women in the upper part of the distribution. To study this question we intend to divide the women into three separate groups according to wage, and undertake the simutions separately for each of these groups. As the analysis divides the women into four birth cohorts, we can also study how the effect varies over time.

Presented in Poster Session 4