Is the Market Pronatalist? Inequality, Differential Fertility, and - - PowerPoint PPT Presentation

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

2.96 2.94 2.77 2.55 2.50 2.31 2.23 2.12 1.94 1.82 3.38 2.97 2.82 2.67 2.66 2.50 2.55 2.75 2.60 2.66 1.00 1.50 2.00 2.50 3.00 3.50 4.00 1 2 3 4 5 6 7 8 9 10 Fertility Income Decile 1980 2010 Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 3 / 24

High Income Fertility & Relative Cost

AL AK AZ AR CA CO CT DE FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY

−1 1 2

Change in High Income Fertility: 1980−2010

.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

1

Build a model that highlights role of marketization for fertility.

2

Result:

accounts for changing fertility paterns.

3

Implication 1:

• HC of next generation.

Through differential fertility. Opposite of standard literature (de la Croix & Doepke 2003; Moav 2005).

4

Implication 2:

• fertility and labor supply of high

income women.

Show quantitatively in model. Estimate empirically in cross-state data (OLS + IV).

5

Further implications for childlessness and marital sorting.

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

c

π

• b

• Bar, Hazan, Leukhina, Weiss, Zoabi

Is the Market Pronatalist? May 16, 2018 7 / 24

Model – Marketization

TC

• min

t f ,m t f

s.t. n

• A
• φtρ

f

• p1

ρ .

• TC
• n, w f, pm
• 1

A

• φ

1 1ρ w ρ ρ

f

• p1

1 1ρ p ρ ρ

m

ρ

n

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

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

• f fertility-income profile.

Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 9 / 24

Qantitative Strategy

Calibration:

1

Wages from data.

2

Remaining 8 parameters calibrated to match 1980 profiles (by decile):

1

Fertility.

2

Mother’s time at home.

3

College atainment of children.

4

Index of marketization.

Exercise: input 2010 wages + pm,2010.

1

Model prediction vs data (untargeted).

2

Decomposition of mechanisms.

Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 10 / 24

Model – Fit

2 4 6 8 10 Income Decile 0.2 0.4 0.6 0.8 1 Tf Model, 1980 Data, 1980 2 4 6 8 10 Income Decile 1.5 2 2.5 3 3.5 Fertility 2 4 6 8 10 0.2 0.4 0.6 0.8 1 Education 2 4 6 8 10 5 10 15 Marketization Index

Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 11 / 24

Model – 2010 Prediction

2 4 6 8 10 Income Decile 0.2 0.4 0.6 0.8 1 Womens' Time at Home 2 4 6 8 10 Income Decile 1.5 2 2.5 3 3.5 Fertility Data, 1980 Data, 2010 Low Benchmark High 2 4 6 8 10 0.2 0.4 0.6 0.8 1 Education 2 4 6 8 10 5 10 15 Marketization Index

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.

• 2-4%

Our model: 3%

Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 13 / 24

Results

Data Model No ∆ No ∆wm 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:

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

.2 .4 .6 .8 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

TheEffectoftheMinimumWageontheWageinIndustriesAssociatedwithHomeProductionSubstitutes

Dependent Variable: The Real Wage OLS 2SLS (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Minimum Real Wage 0.764˚˚˚ 0.771˚˚˚ 0.770˚˚˚ 0.665˚˚˚ 0.648˚˚˚ 0.747˚˚˚ 0.645˚˚˚ 0.550˚˚ 0.632˚˚ 0.582˚˚ (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 1st 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 R2 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

5 6 7 8 9 10

Decile

0.87 0.88 0.89 0.9 0.91

Fertility

With Minimum Wage/Benchmark 2010 Model 5 6 7 8 9 10

Decile

1 1.05 1.1 1.15 1.2 1.25 1.3

Time at Home

With Changing Fertility Fertility Locked In

Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 19 / 24

The Effect of the Minimum Wage on Annual Hours of High Income Women

The Effect of the Minimum Wage on the Labor Supply of High Income Women

Dependent Variable: Log Yearly Hours OLS 2SLS (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) Log min. wage

• 0.032
• 0.008
• 0.022

0.038 0.021 0.039

• 0.544˚˚˚ -0.664˚˚˚ -0.632˚˚˚ -0.503˚˚ -0.405˚ -0.429˚

(0.087) (0.069) (0.065) (0.049) (0.053) (0.052) (0.177) (0.250) (0.225) (0.208) (0.217) (0.233) Year FE Yes No No No No No Yes No No No No No Regionˆ Year FE No Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes State FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Age FE No No Yes Yes Yes Yes No No Yes Yes Yes Yes Education FE No No Yes Yes Yes Yes No No Yes Yes Yes Yes Industry FE No No No Yes No Yes No No No Yes No Yes Occupation FE No No No No Yes Yes No No No No Yes Yes 1st stage F statistic – – – – – – 15.72 24.13 24.25 24.39 24.46 24.62 Obs. 85,506 85,506 85,506 85,506 85,506 85,506 85,506 85,506 85,506 85,506 85,506 85,506 R2 0.013 0.015 0.047 0.256 0.291 0.310 0.012 0.014 0.046 0.255 0.291 0.309

Notes: Standard errors clustered at the state level are in parentheses. ˚ p ă 0.10, ˚˚ p ă 0.05, ˚˚˚ p ă 0.01. The dependent variable is the log of yearly hours worked. Sample of White non-Hispanic married women aged 25-54, whose real hourly wage is in the 9th and 10th

• deciles. Women are assigned to hourly wage decile by state, year and 5-year age group.

Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 20 / 24

The Effect of the Minimum Wage on Annual Hours of High Income Men

TheEffectoftheMinimumWageontheLaborSupplyofHighIncomeMen

DependentVariable:LogYearlyHours OLS 2SLS (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) Log min. wage 0.043 0.011 0.004 0.002

• 0.009
• 0.011
• 0.118
• 0.117
• 0.036

0.031

• 0.061
• 0.032

(0.034) (0.031) (0.028) (0.026) (0.027) (0.027) (0.115) (0.149) (0.123) (0.122) (0.122) (0.119) Year FE Yes No No No No No Yes No No No No No Regionˆ Year FE No Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes State FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Age FE No No Yes Yes Yes Yes No No Yes Yes Yes Yes Education FE No No Yes Yes Yes Yes No No Yes Yes Yes Yes Industry FE No No No Yes No Yes No No No Yes No Yes Occupation FE No No No No Yes Yes No No No No Yes Yes 1st stage F statistic – – – – – – 15.27 25.10 25.18 25.42 25.32 25.63 Obs. 100,243 100,243 100,243 100,243 100,243 100,243 100,243 100,243 100,243 100,243 100,243 100,243 R2 0.013 0.015 0.067 0.160 0.202 0.211 0.013 0.015 0.067 0.160 0.202 0.211

Notes: Standard errors clustered at the state level are in parentheses. ˚ p ă 0.10, ˚˚ p ă 0.05, ˚˚˚ p ă 0.01. The dependent variable is the log of yearly hours worked. Sample of White non-Hispanic married men aged 25-54, whose real hourly wage is in the 9th and 10th

• deciles. Men are assigned to hourly wage decile by state, year and 5-year age group.

Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 21 / 24

Childlessness

1 1.25 1.5 1.75 2 2.25 Relative Childlessness Rates 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Year .05 .1 .15 .2 Childlessness Rates 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Year Women with Advanced Degrees Other Women 1.5 1.75 2 2.25 Children Ever Born to all Women 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Year Children Ever Born to All Women Fitted values

Coefficient=0.011 p value=0.001

1.5 1.75 2 2.25 Children Ever Born to Mothers 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Year Children Ever Born to Mothers Fitted values

Coefficient=0.003 p value=0.256

Bar, Hazan, Leukhina, Weiss, Zoabi Is the Market Pronatalist? May 16, 2018 22 / 24

Sorting

.9 1 1.1 1.2 1.3 Relative Currently Married Rates 1980 1985 1990 1995 2000 2005 2010 2015 Year .94 .96 .98 1 1.02 1.04 Relative Ever Married Rates 1980 1985 1990 1995 2000 2005 2010 2015 Year

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Conclusion

fertility-income gradient

• labor supply & fertility of high income women.

• high income women more atractive in the

marriage market.

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