The Easterlin hypothesis in the recent experience of higher-income OECD countries: A panel-data approach

The Easterlin hypothesis emphasizes the effect of relative cohort size on fertility. Models based on the Easterlin hypothesis have performed well in explaining time series fertility data, although these results have been for long historical time series and have typically been restricted to single country studies. These models are not adequate to determine if the hypothesis still holds and if the success of the Easterlin hypothesis is an artifact of the time period chosen. We use panel data analysis and temporal causality tests to see of the Easterlin hypothesis holds for higher-income OECD countries. The results support the Easterlin hypothesis.All correspondence to Yongil Jeon. An earlier version, The Easterlin hypothesis in OECD countries, was presented at the annual conference of the European society for population economics, Bilbao, Spain, June 2002. We are grateful to two anonymous referees for their helpful comments. The usual caveat applies. Responsible editor: Junsen Zhang.     

The Relevance of the 'Easterlin hypothesis' and the 'new home economics' to fertility movements in Great Britain

Summary The hypothesis that a family's economic status relative to its aspirations (relative economic status) is an important determinant of its fertility behaviour has been developed and applied to the explanation of swings in American fertility by R. A. Easterlin. However, a recent application by Butz and Ward of a model derived from the 'new home economics' (pioneered by Becker and Mincer) strongly suggests that relative economic status is not the dominant factor in explaining fertility movements in the U.S.A. Rather, both current men's and women's wages operate independently in explaining the movement in fertility, and in particular the decline in fertility is attributed to rising women's wages. In this paper we explore the relevance of both the Easterlin hypothesis and the hypotheses derived from the 'new home economics' to the 1955-75 fertility swing in Great Britain. We find that we must reject the Easterlin hypothesis on the basis of the measures of relative economic status suggested by Easterlin and Wachter. A variant of the Easterlin hypothesis suggested by Oppenheimer does receive some support from the available evidence, and the evidence provides strong support for the model of fertility behaviour derived from the 'new home economics', which emphasizes the distinction between the effects of changes in men's and women's real wages on fertility decisions. The cause of the fertility decline is attributed to rising women's wages and employment opportunities through their direct effect on the opportunity cost of time and children among working wives and through their effect on the labour force participation of married women of childbearing age. The test of this model and the estimates of its parameters are not definitive, however, because of deficiencies in the data and problems of statistical estimation. We nevertheless conclude that both this model and the Oppenheimer variant of the Easterlin hypothesis, as well as other elements of a more comprehensive economic theory of fertility, point to a continuation of low fertility and the possibility of a secular decline with fertility approaching some lower asymptote.     

The performance of immigrants in the Norwegian labor market

This paper tests the assimilation hypothesis with Norwegian data. Using both cross-section and cohort analyses, the results show that the 1970–1979 immigrant cohort experienced an earnings growth of about 11% between 1980 and 1990, when their earnings profile was compared to that of natives. This is lower than the 19% assimilation rate predicted by the cross-section method. On the contrary, the results reveal a rapid earnings divergence across cohorts, and between the 1960–1969 cohort and natives. It is also shown that the „quality” of successive immigrant waves has declined over time, thus biasing the cross-section estimates of assimilation. Received: 8 August 1995 / Accepted: 7 January 1997     

The socioeconomic consequences of young women's childbearing: Reconciling disparate evidence

Recent studies have begun to examine rigorously the links between early childbearing and subsequent socioeconomic status. Prominent in this literature has been a set of analyses that have used sibling fixed effects models to control for omitted variables bias. These studies report that the siblings difference procedure leads to smaller estimates of the effects of teen fertility than does standard regression analysis. While it is well known that the siblings fixed effects procedure makes strong assumptions regarding the type of omitted variables and is not necessarily robust to alternative assumptions, the assumptions of the procedure have not been explicitly examined. This paper uses 1979–1992 data from the National Longitudinal Survey of Youth to compare estimates of the income and education consequences of teenage and young adult fertility from standard regression and siblings fixed effects models with estimates from more general, alternative siblings models. Received: 19 January 1998/Accepted: 6 April 1999     

Demographic transition and economic growth: Empirical evidence from Greece

Over the past decades, due to a combination of declining fertility rates and rising life expectancies, most industrialized countries have experienced aging populations and low numbers of young populations that may pose economic problems in the future. This paper investigates the relationship first between fertility rate and infant mortality rate and second among demographic changes, real wages and real output in Greece over the period 1960–96. When we control for fluctuations in overall economic activity and the labor market on the bivariate relationship between fertility and mortality rates, the evidence suggests that Granger-causation must exist in at least one direction. The results show that in the long run a decrease in infant mortality rates, taking into consideration economic performance and the labor market, causes a reduction in fertility rates. Also, employing the vector error-correction models, the variance decomposition analysis and the impulse response functions, the empirical results support the endogeneity of fertility choice to infant mortality, the labor market and the growth process. Received: 16 May 1999/Accepted: 18 September 2000     

Meta-analysis of the impact of age structure on fertility

The paper uses a meta-analysis to comparatively evaluate the literature addressing the aggregate relationship between a populations age structure and fertility, as hypothesized by Richard Easterlin. The analysis is based on 334 estimated effects retrieved from 19 studies. The results suggest that several factors undermine the empirical support of the Easterlinian age structure/fertility link. These include the neglect of income, the use of relative cohort size to characterize the age structure, mis-specifications of the relevant age-cohorts, as well as the functional form and estimation technique. The results also suggest that the sample of published estimates possibly suffers from two types of publication bias, an under-representation of insignificant effects for small samples, and bias towards supportive effects in the earlier years followed by a bias towards negative effects as the literature matured.All correspondence to: Brigitte Waldorf. The authors appreciate the insightful comments and suggestions from two anonymous reviewers. The research also benefited from discussions with participants of the International Colloquium on Meta-analysis in Economics, Free University, Amsterdam, The Netherlands, December 2002. Finally, we would like to thank David Brown, Meagan Cahill, Angela Donelson, Calvin Farris, and Melaney Seacat from the University of Arizona for their research assistance. Responsible editor: Junsen Zhang.     

Forecasting births in Greater London: An application of the easterlin hypothesis

Summary A model for forecasting fertility is proposed in which an attempt is made to represent the cyclical fluctuations in fertility typical of developed societies. R. A. Easterlin has put forward the hypothesis that relative affluence, i.e. tension between material aspirations and resources, is an important determinant of fertility behaviour. Relative cohort size in turn affects relative affluence, because the size of a cohort influences its competitive position in the labour market. However, predictions based on relative cohort size alone neglect other sources of periodic fluctuations in fertility, such as those arising from generational cycles. A periodic component which expresses fertility variations as a direct function of time is, therefore, included in this model. A time series of age-specific fertility rates and population estimates for England and Wales and for Greater London is used to assess the relationship between fertility, relative cohort size, and the periodic time function. There is evidence of significant cyclic effects and some support for the Easterlin hypothesis in that the fertility of younger age groups is inversely related to the relative size of older cohorts. Projections are made of the future trend in total fertility assuming a continuation of the observed relationship. Use of different assumed periodicities permits the generation of variant projections of fertility.     

A conversation with Richard Easterlin

After an introduction touching on various biographical highlights, this paper summarizes a wide-ranging discussion with Richard Easterlin which occurred in the Autumn of 1996. We considered the Easterlin Hypothesis – its genesis and current status, together with Easterlin‘s views on attempts to develop measures of relative income – and then moved on to “The Fertility Revolution” and questions regarding the applicability of the theory of household choice in modernizing societies. This was followed by a discussion of his early career development and influences on him at that time, ending with ruminations regarding the current state of economics, and the validity of training given to young economists today. JEL classification: J10, J11, J13 Received February 13, 1997 / Accepted February 26, 1997     

Feeding the Illusion of Growth and Happiness: A Reply to Hagerty and Veenhoven

In a rebuttal of Easterlin (1995), Hagerty and Veenhoven (2003) analyze data for 21 countries and conclude that “growing national income does go with greater happiness.” But the U.S. experience does not support this conclusion, which they obtain only by mixing together two sets of noncomparable surverys. Moreover, the result of studies of European countries and the U.S. by other scholars do not support their claim either. Furthermore, the experience of 6 out of 7 of their non-European countries fail to support their claim. Finally, if countries in their analysis with quite similar growth rates are grouped, one finds quite disparate trends in happiness, suggesting that factors other than growth in income are responsible for the differential trends in happiness. Instead of straining to feed the illusion that a focus on economic growth will create happiness, an approach is needed that explores the impact on national trends in life satisfaction, not just of material goods, but also of family life, health, work utility, and the like.     

Cohort Effects or Period Effects? Fertility Decline in South Korea in the Twentieth Century

This study examines if the Korean fertility decline is driven by long-term cohort changes or by fluctuating period changes. By using a classic age–period–cohort model, a moment decomposition method, and a new summary fertility measure—‘cross-sectional average fertility’—I show that the Korean fertility decline is primarily driven by period changes and that delayed childbearing has important consequences for the onset of fertility decline. These findings are in line with the existing literature in fertility changes such as theories of fertility transitions and sociological accounts of fertility changes in Western countries in the twentieth century. The policy implications of these findings are also discussed.     

Selective Out-Migration from Florida

I test if selective out-migration of unhealthy seniors explains why disability rates are so much lower for Florida, as compared to the national average. This particular area of research is timely given the significant demographic changes relating to aging. Moreover, this study contributes to the body of literature examining migration with respect to disability and widowhood. Using State Federal Information Processing Standard (FIPS) and Public Use Microdata Areas (PUMA), I create national maps showing disability rates for the following age-groups: 50–59, 60–69, and 70+. After creating maps in ARCGIS and conducting univariate and clustering analysis on mobility disability and personal care limitation, I employ multinomial logit (MNL) analysis to test if individuals with disability are more likely to out-migrate from Florida. The regression analyses lend support to the relaxed Litwak and Longino (The Gerontologist, 27(3): 266–272, 1987) second-move hypothesis, which claims individuals with progressively worse health are more likely to undertake another move to be closer to family and friends. I state “relaxed” because the data does not allow one to determine the reason for migration—only that migration occurred during the past year. This research informs policy-makers to recognize that elderly in better health may migrate to places such as Arizona and Florida due to amenity-seeking behavior, but unhealthy elderly are more likely to leave these states due to assistance-seeking behavior. This out-migration can place excess demand on health services for the incoming regions, which requires state and local government to ensure resources are in place. Also noteworthy, my results are less likely to be flawed by erroneous age and sex data in the public use microdata samples (IPUMS) since I stack the 2006 and 2007 American Community Survey (ACS). A recent working studies by Alexander et al. (Inaccurate age and sex data in the Census PUMS files: Evidence and implications. Munich: CESifo, 2010) shows inaccuracies in the IPUMS for the 1 and 5% 2000 Census, the 2003–2006 ACS, the 2005–2007 3-year ACS, and the 2004–2009 current population survey (CPS) files.     

Banking on fewer children: financial intermediation,fertility and economic development

This paper shows that financial intermediation can influence fertility and labor allocation decisions by raising market wages. The increase in wages induces some households to abandon “traditional” labor intensive methods of production managed at the household level and supply labor to “modern” sector firms. Since it is optimal for households in the modern sector to have fewer children, the labor allocation decision leads to lower national fertility. A panel VAR using financial intermediation, fertility and industrial employment share data in 87 countries is estimated. The empirical results show that the data are consistent with the theoretical predictions. Received: 20 October 1997/Accepted: 31 August 1998     

An assessment of the own-children method of estimating fertility by birthplace in Australia

This paper examines the validity of the own-children method of fertility estimates derived from the 1991 Census by a detailed investigation of mortality assumptions, the presence of non-own children, age misreporting and undercount. A comparison of fertility measures derived alternatively from the census using the own-children method and from vital statistics for the period 1987–91 indicates remarkably similar rates for Australia-born women, and plausible results for long established migrant groups. The own-children fertility levels for some recently arrived migrant groups, however, were found to be misleading. It is suggested that the own-children method is useful for the study of differential current fertility in Australia. Revised version of an essay awarded the W.D. Borrie Prize (graduate section), 1997, and presented to the session: Advances in methods for the analysis of demographic data of the 23rd General Conference of the International Union for the Scientific Study of Population, 11–17 October, Beijing. This paper is based on the author’s PhD thesis entitled:Fertility patterns of Australian selected immigrant groups, 1977–91.     

Male-female differences in labor market outcomes during the early transition to market: The cases of Estonia and Slovenia

Changes in women's relative wages and employment are analyzed, using social security data from Slovenia (1987–1992) and a retrospective labor force survey in Estonia (1989–1994). Estonia adopted liberal labor market policies. Slovenia took an interventionist approach. Nevertheless, relative wages for women rose in both countries. Factors favoring women included: returns to human capital rose in transition, benefiting women; relative labor demand shifted toward predominantly female sectors; low-wage women had a disproportionate incentive to exit the labor market, especially in Estonia. However, women were less mobile across jobs in both countries, so men disproportionately filled new jobs in expanding sectors. Received: 27 November 1997/Accepted: 20 December 1998     

A test of the Easterlin fertility model using income

An important dimension of Easterlin's seminal work on fertility is the hypothesis of intergenerational taste formation, or the relative income hypothesis. Previous estimates have not had data on income in two generations, so the estimated own-income effects may have had a downward bias. This article uses data with income from two generations to estimate the Easterlin model directly. Own income is still not positively significant. A simple single-equation test is developed to distinguish this model from a Becker intergenerational serially correlated endowments model that he claims is observationally equivalent. The test results favor the Becker formulation.     

An economist's non-linear model of self-generated fertility waves

Summary Standard one-sex linear models of Lotka or Bernardelli always approach asymptotically an exponential growth mode with stable age distribution. Realistic non-linear models need not possess this property. The present analysis uncovers a possibly realistic ease where an existent mode of balanced growth is 'unstable', giving way when slightly perturbed to an asymptotic every-other generation limit cycle of determinable amplitude, and which is stable. The nonlinear model utilizes the hypothesis of R. A. Easterlin that age-specific fertility will tend to be lower for age classes that are relatively swollen in total number. By virtue of the law of diminishing returns, wages and feeling of security will tend to be low for such swollen groups. A possible rebound in fertility in the 1980s is implicit in the Easterlin hypothesis.     

Birth and Fortune Revisited: A Cohort Analysis of Underemployment, 1974–2004

The cohort is a key concept in the study of social demography and social change. The enduring influence of cohort membership can arise from history-based and/or size-based effects. The most prominent proponent of size-based cohort effects is Easterlin (Birth and fortune: The impact of numbers on personal welfare, 1980) who argues that individuals hailing from unusually large cohorts will experience adverse labor market conditions relative to the members of the smaller cohorts that bracket them. Drawing on data from the March Current Population Survey for the period spanning 1974–2004, we examine the influence of relative cohort size on underemployment. The results provide modest support for the Easterlin thesis, showing the odds of underemployment to be greatest among members of relatively large cohorts, net of other significant predictors. The results also show that the impact of relative cohort size differs by educational level, suggesting that adverse economic conditions produced by large cohort size can be offset by broader changes in the labor market and other social institutions.

Women’s fertility, religion and education in a low-fertility population: Evidence from South Australia

The old issue of religion and fertility is examined in relation to women s level of education. In-depth interviews exploring influences on parity for Adelaide parents in 2003–04 suggest that more frequent attendance at religious services in childhood, and affiliation with particular religious denominations, are related to both higher preferred and higher achieved parity, even for women with university education. For some university-educated women, their religious upbringing appears to play a part in negating the traditional relationship between higher education and lower fertility. Quantitative data on religion, fertility and educational level from the 1996 Census for women aged 40–44 in South Australia show that women with No Religion had lower fertility than those With a religion, while university-educated women in New Protestan-New Christian groups had higher fertility than university-educated women in other denominations. The findings provide an understanding of some social conditions that support higher fertility in a low-fertility population. Future fertility research in developed countries should include consideration of the influence of religious affiliation and religiosity at disaggregated levels of inquiry.     

The roles of child support enforcement and welfare in non-marital childbearing

This paper examines the effects of stronger child support enforcement and declines in welfare benefits on changes in non-marital childbearing between 1980 and 1996. Economic theory suggests that stricter child support enforcement will increase the costs of children for unwed fathers, making them less likely to have a child outside marriage. Reductions in welfare benefits also are expected to increase the costs of non-marital childbearing for both mothers and fathers. We examine these hypotheses, using aggregate state-level data and fixed effects regression models to identify the effects of policies on non-marital birth rates. We find that both stricter child support enforcement and declines in welfare benefits deter non-marital births. However, the estimated effects of child support enforcement are more robust and larger than those of welfare. The estimates imply that in the 1980–1996 period, increases in child support enforcement led to a decline in non-marital birth rates in the range of 6% to 9%, whereas decreases in welfare benefits led to a decline in the range of 2% to 4%. Received: 28 June 2000/Accepted: 17 September 2001     

Sectoral gender wage differentials and discrimination in the transitional Chinese economy

China's economic reform has affected various ownership sectors to different degree. A comparison of gender wage differentials and discrimination among individuals employed in the three sectors – state sector, the collective sector, and the private sector – provides information on the impact of economic reform. Two Chinese data sets from Shanghai and Jinan are used to examine the gender wage gap across the three sectors. It is found that privatization/marketization of the economy leads to larger wage differentials as human capital characteristics are more appropriately rewarded. Both data sets show that the relative share of discrimination in the overall gender wage differential declines substantially across ownership sectors from the state to the private. The increase in gender wage differential due to marketization is much larger than any increase in differential that may arise from more gender discrimination. Received: 5 November 1997/Accepted: 10 January 2000