Changing Fertility Rates in Developed Countries: The Impact of Labor Market Institutions

Alicia Adsera, University of Illinois at Chicago

The institutional features of labor markets affect not only the size of the opportunity cost of childbearing but also how it varies with age at childbirth and labor market attachment. I used a panel of 23 OECD nations for the last 35 years to study how labor market institutions can account for the recent sharp decrease in fertility and the positive correlation between participation and fertility across developed nations. On the one hand, labor market instability induces women to reduce and postpone fertility to lower lifetime income uncertainty and the risk of unemployment. Unemployment and both the share of self-employment and fixed-term (unstable) contracts, common in Southern Europe, depress fertility for the 20-24 and 25-29 year group. On the other hand, a large share of public employment, such as in Scandinavia, and generous maternity benefits, mostly linked to employment, boosts fertility for all groups, but especially for 30-34 year olds.