Is the Market Pronatalist? Inequality, Differential Fertility, and Growth Revisited Michael Bar Moshe Hazan Oksana Leukhina David Weiss Hosny Zoabi May 16, 2018 Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 1 / 24
Introduction Historically: negative relationship between income and fertility. Prominent mechanism: Opportunity cost of raising children. In recent decades, the relationship flatened substantially. At the same time, large increase in income inequality. Qestion: can changes in marketization (outsouring) explain trend? Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 2 / 24
Fertility by Income Decile 1980 & 2010 4.00 3.38 3.50 2.97 3.00 2.82 2.75 2.96 2.67 2.66 2.66 2.94 2.60 2.55 2.50 2.77 Fertility 2.50 2.55 2.50 2.31 2.23 2.00 2.12 1.94 1.82 1.50 1980 2010 1.00 1 2 3 4 5 6 7 8 9 10 Income Decile Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 3 / 24
High Income Fertility & Relative Cost WY 2 Change in High Income Fertility: 1980−2010 ND 1 WV DE NM GA NC FL WI LA IL NV MS IN CT NJ MD AK VA SD MT OH AL CA MN NY PA OK AR TX ME MO MI AZ MA CO NE RI WA OR 0 UT SC IA TN NH HI KS ID KY VT −1 .4 .6 .8 1 1.2 1.4 Change in Relative Wage of High Income Women to Workers in HPS: 1980−2010 Change in Fertility Fitted values coefficient=1.064 p−value=0.000 Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 4 / 24
What we do Build a model that highlights role of marketization for fertility. 1 Result: � inequality & � price of market good substitutes quantitatively 2 accounts for changing fertility paterns. Implication 1: � inequality � HC of next generation. 3 � Through differential fertility. Opposite of standard literature (de la Croix & Doepke 2003; Moav 2005). Implication 2: � Minimum wage � fertility and labor supply of high 4 � income women. Show quantitatively in model. Estimate empirically in cross-state data (OLS + IV). Further implications for childlessness and marital sorting. 5 Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 5 / 24
Literature Inequality & differential fertility: de la Croix & Doepke (2003), Moav (2005), Hazan & Zoabi (2015), Jones, Schoonbroodt, & Tertilt (2010), Vogl (2016) Marketization: Cortes & Tessada (2011), Furtado (2016), Mazzolari & Ragusa (2013), Greenwood et al. (2016, others) Minimum wage: Baskaya & Rubinstein (2012) Childlessness: Baudin, de la Croix & Gobbi (2015) Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 6 / 24
Model – Outline u � ln p c � α ln p n � βπ p e q q q c � p n n � p e en � w f � w m � � q θ π p e q � ln b p e � η Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 7 / 24
Model – Marketization TC p n min t f , m t f � w f � m � p m q � s.t. � 1 ρ . � φ t ρ q m ρ n A p 1 � φ f � � � � 1 � ρ ρ ρ � 1 � ρ 1 1 1 � ρ w 1 � ρ p ρ � 1 ρ � 1 � � TC n , w f , p m φ p 1 � φ n � p n n . m f A � q Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 8 / 24
Model – Men Traditional Gender Roles: Men pay no time cost of children. Increase in male inequality � flatening of fertility-income profile due to income effect. Modern Gender Roles: Men pay time cost of children. Increase in male inequality: only generates flatening fertility-income profile with marketization. Conservative assumption: traditional gender roles. Gives other mechanisms related to inequality best chance of explaining flatening of fertility-income profile. Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 9 / 24
Qantitative Strategy Calibration: Wages from data. 1 Remaining 8 parameters calibrated to match 1980 profiles (by decile): 2 Fertility. 1 Mother’s time at home. 2 College atainment of children. 3 Index of marketization. 4 Exercise: input 2010 wages + p m ,2010 . Model prediction vs data (untargeted). 1 Decomposition of mechanisms. 2 Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 10 / 24
Model – Fit 1 3.5 0.8 3 0.6 Fertility T f 2.5 0.4 2 0.2 0 1.5 2 4 6 8 10 2 4 6 8 10 Income Decile Income Decile 1 15 0.8 Marketization Index 10 Education 0.6 0.4 5 0.2 0 0 2 4 6 8 10 2 4 6 8 10 Model, 1980 Data, 1980 Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 11 / 24
Model – 2010 Prediction 1 3.5 Womens' Time at Home 0.8 3 0.6 Fertility 2.5 0.4 2 0.2 0 1.5 2 4 6 8 10 2 4 6 8 10 Income Decile Income Decile 1 15 0.8 Marketization Index 10 Education 0.6 0.4 5 0.2 0 0 2 4 6 8 10 2 4 6 8 10 Data, 1980 Data, 2010 Low Benchmark High Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 12 / 24
Model – Marketization Strength The average fraction of household income spent on market substitutes is 4.7%. Mazzolari & Ragusa (2012) find that a 1 p.p. � top decile wage bill � 2-4% � employment in HPS section. Our model: 3% Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 13 / 24
Results Data Model No ∆ No ∆ w m Marketization % ∆ High Income Fert 40.0% 43.5% -34.0% 30.0% % ∆ MDF 38.5% 41.0% -14.0% 24.0% % ∆ MDF Top/Botom 18.6% 24.4% -11.1% 15.1% ∆ Fraction College (pp) 1.70 2.40 -1.23 1.60 Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 14 / 24
Minimum Wage Minimum wage affects the price of home production substitutes. Increases in the minimum wage: � labor supply, especially when fertility cannot adjust. � fertility. Effects are differential across the income distribution. Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 15 / 24
Minimum Wage – Affects HPS Sector Workers .8 .6 .4 .2 0 1 2 3 4 5 6 7 8 9 10 Relative Wage Home Production Substitutes Others Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 16 / 24
Minimum Wage – Instrument Idea: Minimum wage effect on wages HPS sector workers. Problem: Minimum wage changes endogenous. Instrument (Baskaya & Rubinstein 2012): Changes in federal minimum wage are exogenous to state conditions. Probability Federal binds: state liberalism index (pre-sample). Instrument: Interaction of federal min wage & index of liberalism. Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 17 / 24
The Effect of the Minimum Wage on Wages in HPS The � Effect � of � the � Minimum � Wage � on � the � Wage � in � Industries � Associated � with � Home � Production � Substitutes Dependent Variable: The Real Wage OLS 2SLS (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 0.764 ˚˚˚ 0.771 ˚˚˚ 0.770 ˚˚˚ 0.665 ˚˚˚ 0.648 ˚˚˚ 0.747 ˚˚˚ 0.645 ˚˚˚ 0.550 ˚˚ 0.632 ˚˚ 0.582 ˚˚ Minimum Real Wage (0.059) (0.053) (0.063) (0.058) (0.056) (0.169) (0.133) (0.267) (0.248) (0.247) State FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Year FE Yes Yes No No Yes Yes Yes No No No Region ˆ Year FE No No Yes Yes Yes No No Yes Yes Yes Average State Wages No Yes No No Yes No Yes No No Yes Demographic Controls No No No Yes Yes No No No Yes Yes 1 st Stage F -Statistic – – – – – 16.47 15.90 26.72 26.93 26.08 Obs. 228,197 228,197 228,197 228,197 228,197 228,197 228,197 228,197 228,197 228,197 R 2 0.258 0.259 0.259 0.372 0.372 0.258 0.258 0.259 0.372 0.372 Notes : Standard errors in parentheses are clustered at the state level. ˚ p ă 0.10, ˚˚ p ă 0.05, ˚˚˚ p ă 0.01. Sample comprises workers in industries of the economy associated with home production substitutes for the years 1980 to 2010 using CPS data. Demographic controls include age fixed effects, education fixed effects, occupation fixed effects, Hispanic and race fixed effects. The instrument for Columns 6–10 is the interaction between average state liberalism between 1960 and 1980 and the real federal minimum wage. Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 18 / 24
Minimum Wage – Qantitative Results 0.91 0.9 Fertility 0.89 0.88 With Minimum Wage/Benchmark 2010 Model 0.87 5 6 7 8 9 10 Decile 1.3 With Changing Fertility 1.25 Fertility Locked In Time at Home 1.2 1.15 1.1 1.05 1 5 6 7 8 9 10 Decile Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 19 / 24
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