DP12884 Childbearing Postponement, its Option Value, and the Biological Clock
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.
