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.