DP17316 The Emergence of Procyclical Fertility: The Role of Gender Differences in Employment Risk
Fertility in the US exhibits an increasingly more procyclical pattern. We argue that women’s breadwinner status is behind procyclical fertility: (i) women’s relative income in the family has increased over time; and (ii) women are more likely to work in relatively stable and countercyclical industries whereas men tend to work in volatile and procyclical industries. This creates a countercyclical gender income gap as women become breadwinners in recessions, producing an insurance effect of women’s income. Our quantitative framework features a general equilibrium OLG model with endogenous fertility and human capital choice. We show that the change in gender employment cyclicality can explain 38 to 44% of the emergence of procyclical fertility. Our counterfactual analysis shows that in a world in which men become nurses and women become construction workers, we would observe “countercyclical fertility” but at the expense of lower human capital accumulation as families lean in more towards quantity in the quality-quantity trade-off.