Discussion Paper Details

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Title: Childbearing Postponement, its Option Value, and the Biological Clock

Author(s): David de la Croix and Aude Pommeret

Publication Date: April 2018

Keyword(s): Assisted reproduction technology, Career uncertainty, Late parenthood and Real option

Programme Area(s): Macroeconomics and Growth

Abstract: Having children is like investing in a risky project. Postponing birth is like delaying an irreversible investment. It has an option value, which depends on its costs and benefits, and in particular on the additional risks motherhood brings. We develop a parsimonious theory of childbearing postponement along these lines. We derive its implications for asset accumulation, income, optimal age at first birth, and childlessness. The structural parameters are estimated by matching the predictions of the model to data from the National Longitudinal Survey of Youth NLSY79. The uncertainty surrounding income growth is shown to increase with childbearing, and this increase is stronger for more educated people. This effect alone can explain why the age at first birth and the childlessness rate both increase with education. We use the model to simulate two hypothetical policies. Providing free medically assisted reproduction technology does not affect the age at first birth much, but lowers the childlessness rate. Insuring mothers against income risk is powerful in lowering the age at first birth.

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Bibliographic Reference

de la Croix, D and Pommeret, A. 2018. 'Childbearing Postponement, its Option Value, and the Biological Clock'. London, Centre for Economic Policy Research.