Business cycles and fertility dynamics in the United States

Using recent developments in time-series econometrics, this paper investigates the behavior of fertility over the business cycle. The sex-specific unemployment rates, the divorce rate and the fertility rate are shown to be governed by stochastic trends. Furthermore, fertility is determined to be cointegrated with the divorce rate.In the bivariate vector-autoregressions between fertility and unemployment, an increase in the female or male unemployment rates generate a decrease in fertility, which is consistent with the findings of previous time-series research concerning the procyclical behavior of fertility. However, when the models include the divorce rate and the proportion of young marriages as additional regressors, shocks to the unemployment rates bring about an increase in fertility, implying the countercyclicality of fertility. This outcome holds for the time period 1948–1982, as well as 1972–1982.I would like to thank Clive Granger, Michael Grossman, Theodore Joyce, Salih Neftei, Jeffrey Zax and two anonymous referees for helpful comments. Any errors reflect my shortcomings only. This paper is the revised version of the National Bureau of Economic Research Working Paper No. 3177. It has not undergone the review accorded official NBER publications; in particular, it has not been submitted for approval by the Board of Directors.