Economics of Fertility Chapter 5 Part I

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

Economics of Fertility  Was introduced by Malthus to economics and his basic tenet was that Food Population Time Growth rate Population grows at a geometric rate, food production grew at an arithmetic rate

Ways in Which to Deal With Population Explosion  Positive Checks –War –Famine –Pestilence  Preventive Checks –Moral Restraint –Contraception –Abortion

Fertility in Modern Economics  Once again, –Gary Becker  Demography –Study of population

Terms  Birth Rate –Number of births in a year (or given period) devided by the total population –In 2001, 4.03 million births –285 million people

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 = (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 (FR FR FR … + FR )  In 2001 in the US the TFR was 2.034

Zero Population Growth  Zero Population Growth (ZPG)  ZPG is obtained when TFR = 2.13  This is because 50% births are male  And some women either die or do not have children, hence TFR > 2  In the US ZPG < 0

MEASURES OF US FERTILITY, 2001 TERMDEFINITION AND FORMULAVALUE NUMBER OF BIRTHS-4.03MILLIONS BIRTH RATEBIRTHS PER 1000 POP = (BIRTHS/POP) * FERTILITY RATEBIRTHS PER 1000 WOMEN, AGE = (BIRTHS/NUM. OF WOMEN, AGE 15-44) * NONMARITAL FERTILITY RATE BIRTHS PER 1000 UNMARRIED WOMEN, AGE = (BIRTHS TO UNMARRIED WOMEN/ NUM. UNMARRIED WOMEN, AGE 15-44) * TOTAL FERTILITY RATENUMBER 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, FERTILITY RATE (BIRTHS/1000 WOMEN) TOTAL BIRTHS (MILLIONS FERTILITY RATE (LEFT SCALE) # BIRTHS (RIGHT SCALE)

US FERTILITY RATE BY RACE AND ETHNICITY, 2001

BIRTHS PER WOMAN, SELECTED EUROPEAN COUNTRIES, 1970 AND AUSTIRA FRANCE GERMANY ITALY PORTUGAL RUSSIAN FERDERATION SWEDEN UNITED KINGDOM2.41.7

Fertility Modern Economic Approach  Preferences –Demand for Child Services  Quantity  Quality U = U (CS, A) where A are all other goods

Fertility Modern 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

Fertility Modern Economic Approach  COST –Opportunity Cost  C CS = C( W M, W F, P Z )  Changes in Costs –Δ P CS / Δ W M > 0 –Δ P CS / Δ W F > 0 –Δ P CS / Δ P Z > 0

Fertility Modern Economic Approach  Price  P CS  C CS = C( W M, W F, P Z )  Full Income  Y F = ( W M X T ) + ( W F X T) + V  DEMAND FOR CHILDREN –CS* = D (P CS, P A, Y F, Preferences)

THE IMPACT OF WAGES ON THE PRICE OF CHILD SERVICES AND FULL INCOME WAGE CHANGE PRICE OF CHILD SERVICESFULL INCOME INCREASEINCREASES, TO THE EXTENT THAT THE INDIVIDUAL WITH THE HIGHER WAGE CONTRIBUTED TO PRODUCTION OF CHILD SERVICES INCREASES DECREASEDECRASES, TO THE EXTENT THAT THE INDIVIDUAL WITH THE LOWER WAGE CONTRIBUTED TO PRODUCTION OF CHILD SERVICES DECREASES