Governments in many high-income countries are struggling with rapid aging of the population driven by extremely low fertility rates. In Germany, Italy, Spain and Japan, fertility rates have been below 1.5 babies per woman for more than two decades, meaning that each new generation is less than three-quarters the size of the previous generation. In East Asian countries, such as South Korea, the fertility rate is below one child per woman. Even in the United States, which for some time maintained a fertility rate above the average of high-income countries, the fertility rate has recently dropped to about 1.6.
How do we explain why fertility rates are declining, and how we can assess what measures may contribute to higher fertility rates in the future?
Beginning with Baker (1960), economic models of fertility behavior rely on two main concepts for the empirical regularity of fertility choice. The first of these is quantity-quality transactions: the idea that the richer people are, the more they invest in their children’s ‘quality’, especially in their education. Because education is expensive, parents prefer to have fewer children because of increased income. The second main idea is that women focus on spending time. According to this process, children are more ‘expensive’ when women’s wages are higher and many women work because of the competitive use of women’s time in raising and working children. Based on these processes, first-generation models of fertility behavior were able to account for the empirical regularization that took place decades ago in a wide range of countries, especially the observation that fertility rates were lower in countries that were rich and where many women worked.
New fertility information
The strengths emphasized by first-generation models remain relevant in many places, especially in countries that are still undergoing demographic change. However, as we have argued in a recent literature study on the economics of fertility (Doepke et al. 2022), the classic concepts of first generation models of fertility help little to understand the ultra-low fertility rate of high income. Countries today because early observations that inspired first-generation models no longer hold up to recent data. As a result, the fertility economy has entered a new era, where a new set of energy drives much of the observed diversity of fertility.
Figure 1 OECD Gross Fertility Rate and GDP per capita across the country
Figures 1 and 2 show how fertility has changed in high-income countries. In the 1980s, per capita GDP fertility in the OECD economy was still declining; By 2000, it was a rich country with more children. Similarly, Figure 2 shows that in the 1980 OECD, female labor force participation had the lowest fertility rate. By 2000, that relationship was reversed – fertility is now at its highest in countries where many women work.
Figure 2 OECD Total Fertility Rates and Women’s Labor Participation Across the Country
Family and career balance as determinants of fertility
The altered empirical regularity of fertility was first mentioned in sociological literature (e.g. Rindfus and Brewster 1996) and was discussed in economics, starting with the contributions of Ahn and Mira (2002), Dale Boca (2002), Aps and Rees (2004). Ferrer et al. (2008). In order to account for the new data on fertility choices in today’s high-income countries, researchers had to consider new mechanisms that go beyond the power emphasized by first-generation studies. Recent research in economics, demographics, and sociology that addresses this challenge has a common theme: the relevance of women’s careers and family planning emerges as key determinants of fertility behavior.
The underlying change that connects the decision of career-family harmony and fertility is the change in the overall aspirations and life plan of women. As emphasized in recent works by Claudia Goldin (2020, 2021), in the past most women saw career and a family as mutually exclusive choices – achieving one of these goals meant accepting one sacrifice over another. Today, most women in high-income countries want to have both a family and a full-fledged career for most of their adult life. This ambition has long been a reality for most men in high-income countries; So the change in women’s aspirations reflects a similarity in the overall life plans of women and men.
According to the new Fertility Literature, the aspirations of both career and family are important for fertility outcomes because there is a significant difference across the country in how consistent these two goals actually are. In a country where it is easy to combine career and family, there are both women; In a country where there is a conflict between the two, women are forced to compromise, resulting in fewer children being born and fewer women working.
What is the cause of career-family harmony?
In our survey, we highlight four factors that help combine a career with a family: family policy, cooperative fathers, favorable social norms, and a flexible labor market.
The biggest challenge in uniting a career and family is meeting the needs of childcare. If women had to provide most of the childcare on their own, it would be difficult or impossible to pursue a demanding career while having young children. A common alternative to child care is provided by day-care centers and pre-schools, which can be public or private. If this type of childcare is widely available, covers all working days and is affordable, it will be easier for women to continue working with young children and consequently be more likely to have a large family (Dell Boca 2002, Apps & Reese 2004).
Figure 3 Fertility and Women’s Employment-Population Ratio by Public Early Childhood Education Expenditure
Consistent with this insight, Figure 3 (which is based on Oliveti and Petrongolo 2017) shows that government spending on early childhood education is closely related to both fertility rates and women’s employment across the country. Countries with the lowest total fertility rates (below 1.5) are less than half the cost of early childhood education. Other policies that help determine career-family compatibility include parental leave policy, tax policy, and length of school days.
Parents can also provide child care. Time usage data shows that until a few decades ago, mothers spent far more time than fathers on childcare, but in many countries fathers’ contributions have increased. The division of child care between parents has a direct effect on reproductive decisions if parents bargain for extra children. Doepke and Kindermann (2019) show that in recent data, couples are more likely to have another child if both partners express a desire for a child. If men contribute less to child rearing, women will be less likely to agree to another child and less fertile.
Figure 4 Men’s housework and part of fertility across the country
Consistent with this view, Figure 4 demonstrates a strong cross-country correlation between male contribution to child care and household chores and overall fertility rate. In all countries with a fertility rate below 1.5 (blue dot) males work less than one third of the household.
The role of inter-household bargaining for fertility implies that the division of labor in the case of households for fertility rate is a profound determinant. These factors include family policy such as paternity leave (Farré and Gonzalez 2019), social norms on the role of mothers at home and at work (Myong et al. 2020), and workplace practices such as long-term expectations in the workplace and flexibility in dealing with sudden childcare requirements ( Or absence), for example when a child is ill.
Finally, career and family compatibility also depends on labor market conditions (Del Boca 2002, Adserà 2004, Da Rocha and Fuster 2006). If it is difficult to find a stable, well-paying job and the unemployment rate is high, parents may be concerned that a temporary career breakdown may become permanent after the birth of a child. Having other children is not a concern when it is easy to find a desirable and flexible job.
For policymakers concerned about ultra-low fertility, the new economy of fertility does not provide a simple, immediate solution. Factors such as social norms and overall labor market conditions change gradually over time, and even potential productive policy interventions may have effects that simply build up over time. Nevertheless, the clear cross-country association of fertility rates with the measurement of family-career compatibility shows that ultra-low fertility is not an inevitable fate, but a reflection of the prevailing policies, institutions and rules in a society. New generation research on how these traits determine fertility rates can help guide future pathways that always avoid the current trajectory of small families and gradually reduce the population.
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