Modelling the fertility-employment relationship: Simultaneity and misspecification testing

The relationship between fertility and the employment of women is examined in the framework of micro-economic fertility analysis. Sociological considerations enter through the assumption that the shape of the utility function is influenced by women's sex role attitudes. An equilibrium assumption leads to a simultaneous three-equation model, which is estimated from a sample of 1303 married women living in the Greater Athens Area. Misspecification testing, however, revealed the presence of significant heteroscedasticity in the two demand equations for employment and number of children. A final model consisting of three structural and two variance equations was estimated. The main finding of the analysis is that of a significant causal influence of employment on fertility, both directly and through sex role attitudes. Fertility does not appear to have any significant effect on employment. The model is used to make some policy recommendations.