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Economics of Fertility Chapter 5
Economics of Fertility
Chapter 5
Economics of Fertility 1960s about 4 million births in the US
– Nearly 1 out of every 8 women gave birth between the ages of 15 and 44
– Nearly 1 in 4 between the ages of 20 to 24
In 2000 there was about 4 million births in the US– But only 1 our of every 16 in the 15 to 44
Nassau William Senior
September 26, 1790 - June 4, 1864
Nassau William Senior THE FOUR POSTULATES:
– That every man desires to obtain wealth with as little sacrifice as possible
– That the population of the world, or in other words, the number of persons inhabiting it, is limited only by a fear of a deficiency of those articles of wealth which the habits of the individuals of each class of its inhabitants lead them to require
THE FOUR POSTULATES: That the powers of labour, and of other
instruments which produce wealth, may be indefinitely increased by using their products as the means of further production.
That, agricultural skill remaining the same, additional labour employed on the land within a given district produces in general a less proportionate return….
Thomas Robert Malthus
February 13, 1766-December 29, 1834
Thomas Robert Malthus An Essay on the Principle of
Population, as it affects the Future Improvement of Society, with Remarks on the Speculations of Mr Godwin, M. Condorcet and Other Writers, anonymous (London, J. Johnson, 1798)
Thomas Robert Malthus Positive Checks
– War– Famine– Pestilence
Preventive Checks– Moral Restraint– Contraception– Abortion
Economics of Fertility Was introduced by Malthus to economics
and his basic tenet was that
Food
Population
Time
Gro
wth
rat
e
Population grows at a geometric rate, food production grew at an arithmetic rate
Fertility in Modern Economics
Once again,– Gary Becker
Demography– Study of population
Terms Birth Rate
– Number of births in a year (or given period) divided by the total population
– In 2001, 4.03 million births– 285 million people
%41.1285
03.42001
million
million
populationTotal
birthsRateBirth
Birth Rate Normally based on 1,000 people Hence, birth rate for the U.S. in 2001
was 14.1 per 1000 population The per 1000 can be skipped since it
is generally understood to be such
Natural Rate of Population
The natural rate of population is defined as:– Birth rate – Death Rate– Where death rate is constructed similar to
birth rate
Birth Rate vs. Fertility Rate
Birth Rate is based on whole population
Fertility rate is based on at-risk population
Thus, fertility rate can be constructed based on women age 15 to 44.
Fertility Rate
In 2001 the fertility rate in the U.S. was 65.3 per 1000
An approximation can be obtained by– Multiply by 2 the birth rate
14.1 X 2 = 28.1 (account for about 50% being male)
28.1 X 2.3 = 64.63 (for about little more than 50% of the population of female population being under 15 or older than 44
Fertility Rate Age specific Non-marital fertility rates Sub groups:
– By race– Ethnicity– etc
Total Fertility Rate Total Fertility Rate (TFR)
TFR = 5 (FR10-14 + FR15-19 + FR20-24 +…
+ FR45-49)
In 2001 in the US the TFR was 2034
Zero Population Growth Zero Population Growth (ZPG) ZPG is obtained when TFR = 2130 This is because 50% births are male And some women either die or do not
have children, hence TFR > 2000 In the US ZPG < 0
MEASURES OF US FERTILITY, 2001TERM DEFINITION AND
FORMULAVALUE
NUMBER OF BIRTHS - 4.03MILLIONS
BIRTH RATE BIRTHS PER 1000 POP =(BIRTHS/POP) * 1000
14.1
FERTILITY RATE BIRTHS PER 1000 WOMEN, AGE 15-44 =
(BIRTHS/NUM. OF WOMEN, AGE 15-44) * 1000
65.3
NONMARITAL FERTILITY RATE
BIRTHS PER 1000 UNMARRIED WOMEN, AGE 15-44 =
(BIRTHS TO UNMARRIED WOMEN/ NUM. UNMARRIED
WOMEN, AGE 15-44) * 1000
43.8
TOTAL FERTILITY RATE
NUMBER OF LIFETIME BIRTHS TO 1000 WOMEN IF THEY HAD CURRENT AGE-
SPECIFIC FERTILITY RATES
2034
Baby Boom vs. Baby Bust US FERTILITY RATE AND TOTAL BIRTHS, 1940-2001
FE
RT
ILIT
Y R
AT
E
(BIR
TH
S/1
000
WO
ME
N)
200
150
100
50
5
4
3
2
1940 1960 1980 2000
TO
TA
L B
IRT
HS
(M
ILL
ION
S
FERTILITY RATE (LEFT SCALE)
# BIRTHS (RIGHT SCALE)
US FERTILITY RATE BY RACE AND ETHNICITY, 2001
58.1
64.2
65
67.2
96
0 20 40 60 80 100
NATIVEAMERICAN
ASIAN-PACIFICISLANDER
WHITE
BLACK
HISPANIC
BIRTHS PER 1000 WOMEN, AGE 15-44
BIRTHS PER WOMAN, SELECTED EUROPEAN COUNTRIES, 1970 AND 1995
1970 1995
AUSTRIA 2.3 1.4
FRANCE 2.5 1.7
GERMANY 2.0 1.3
ITALY 2.4 1.3
PORTUGAL 2.8 1.4
RUSSIAN FERDERATION
2.0 1.4
SWEDEN 1.9 1.7
UNITED KINGDOM 2.4 1.7
FertilityModern Economic Approach
Preferences– Demand for Child Services
Quantity Quality
U = U (CS, A)
where A are all other goods
FertilityModern Economic Approach
Production Child Services production function
– CS = F(T,Z)– Where T is the Time involved and – Z the cost of purchasing things for them
FertilityModern Economic Approach
COST– Opportunity Cost
CCS = C( WM, WF, PZ )
Changes in Costs– Δ PCS / Δ WM > 0
– Δ PCS / Δ WF > 0
– Δ PCS / Δ PZ > 0
FertilityModern Economic Approach
Price PCS CCS = C( WM, WF, PZ )
Full Income YF = ( WM X T ) + ( WF X T) + V
DEMAND FOR CHILDREN– CS* = D (PCS, PA, YF, Preferences)
FertilityModern Economic Approach:
Comparative Statics
A Change in Full Income Effects– Income Effect Ξ Δ CS* / Δ YF > 0
A Change in the Wage Rate– Substitution Effect Ξ Δ CS* / Δ WF < 0
Assuming constant YF
HOW AN INCREASE IN THE WAGE RATE AFFECTS THE
AMOUNT OF CHILD SERVICES DEMANDED
P1
P0
CS’ CSo CS1
D1Do
PRICE OF CHILD SERVICES
AMOUNT OF CHILD SERVICES DEMANDED
THE EFFECT OF AN INCREASE IN THE WAGE RATE ON THE QUANTITY AND QUALITY OF
CHILDREN
P1
P0
N’
N1
No
D1Do
PRICE
CHILD QUANTITY
(A)
P1
P0
L’ Lo L1
D1
Do
PRICE
CHILD QUALITY
(B)
THE EFFECT OF AN INCREASE IN THE WAGE RATE ON THE QUANTITY AND QUALITY OF
CHILDREN
Δ PL / Δ N > 0
Δ PN / Δ L > 0
THE IMPACT OF WAGES ON THE PRICE OF CHILD SERVICES AND FULL INCOME
WAGE CHANGE
PRICE OF CHILD SERVICES
FULL INCOME
INCREASE INCREASES, TO THE EXTENT THAT THE INDIVIDUAL WITH
THE HIGHER WAGE CONTRIBUTED TO
PRODUCTION OF CHILD SERVICES
INCREASES
DECREASE DECRASES, TO THE EXTENT THAT THE INDIVIDUAL WITH
THE LOWER WAGE CONTRIBUTED TO
PRODUCTION OF CHILD SERVICES
DECREASES
