Does Economic Uncertainty Have an Impact on Decisions to Bear Children? Evidence from Eastern Germany

Sumon Bhaumik, London Business School
Jeffrey Nugent, University of Southern California

Nowhere in Central and Eastern Europe was transition as abrupt as in Eastern Germany, due to its immediate reunification with West Germany. The post-unification period was marked by a sharp fall in fertility rates in Eastern Germany, suggesting a link between childbearing decisions and uncertainty. To date, there is neither a theoretical model that distinguishes between the various kinds of uncertainty nor an empirical test of the effects of any such form on fertility in the East German context. This paper develops a theoretical model that distinguishes between alternative sources of uncertainty in their effects on fertility, and takes advantage of the East German segment of the GSOEP for various years in the 1990s to test the implications derived from the model. The empirical results indicate that employment related uncertainty had significant and detrimental effect on the childbearing decisions of East German women.