Perceived Economic Uncertainty and Fertility: Evidence From a Labor Market Reform

Whereas in theory individuals tend to postpone fertility decisions in times of economic uncertainty, empirical evidence on that question is scarce. Using data from the German Socio‐Economic Panel (N = 4,548), the authors estimated the effect of economic concerns on the probability of becoming pregnant in the next year. They exploited exogenous variation in economic concerns induced by the announcement of a major German unemployment benefit reform as an instrumental variable and found that strong economic concerns were significantly related to lower fertility of women between ages 26 and 44 years cohabiting with a male partner. Jointly estimating the impact of male and female concerns in a model that allows for endogeneity of perceived economic uncertainty revealed that it was strong economic concerns perceived by the women that reduced fertility. The effect was driven by male main breadwinner couples, by couples with a medium household income, and by couples who already had children.