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Economics of Fertility

Economics of Fertility. Chapter 5. Economics of Fertility. 1960s about 4 million births in the US Nearly 1 out of every 8 women gave birth between the ages of 15 and 44 Nearly 1 in 4 between the ages of 20 to 24 In 2000 there was about 4 million births in the US

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Economics of Fertility

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  1. Economics of Fertility Chapter 5

  2. Economics of Fertility • 1960s about 4 million births in the US • Nearly 1 out of every 8 women gave birth between the ages of 15 and 44 • Nearly 1 in 4 between the ages of 20 to 24 • In 2000 there was about 4 million births in the US • But only 1 our of every 16 in the 15 to 44

  3. Nassau William Senior September 26, 1790 - June 4, 1864

  4. Nassau William Senior • THE FOUR POSTULATES: • That every man desires to obtain wealth with as little sacrifice as possible • That the population of the world, or in other words, the number of persons inhabiting it, is limited only by a fear of a deficiency of those articles of wealth which the habits of the individuals of each class of its inhabitants lead them to require

  5. THE FOUR POSTULATES: • That the powers of labour, and of other instruments which produce wealth, may be indefinitely increased by using their products as the means of further production. • That, agricultural skill remaining the same, additional labour employed on the land within a given district produces in general a less proportionate return….

  6. Thomas Robert Malthus February 13, 1766-December 29, 1834

  7. Thomas Robert Malthus • An Essay on the Principle of Population, as it affects the Future Improvement of Society, with Remarks on the Speculations of Mr Godwin, M. Condorcet and Other Writers, anonymous (London, J. Johnson, 1798)

  8. Positive Checks War Famine Pestilence Preventive Checks Moral Restraint Contraception Abortion Thomas Robert Malthus

  9. Economics of Fertility • Was introduced by Malthus to economics and his basic tenet was that • Population grows at a geometric rate, food production grew at an arithmetic rate Population Growth rate Food Time

  10. Fertility in Modern Economics • Once again, • Gary Becker • Demography • Study of population

  11. Terms • Birth Rate • Number of births in a year (or given period) divided by the total population • In 2001, 4.03 million births • 285 million people

  12. Birth Rate • Normally based on 1,000 people • Hence, birth rate for the U.S. in 2001 was • 14.1 per 1000 population • The per 1000 can be skipped since it is generally understood to be such

  13. Natural Rate of Population • The natural rate of population is defined as: • Birth rate – Death Rate • Where death rate is constructed similar to birth rate

  14. Birth Rate vs. Fertility Rate • Birth Rate is based on whole population • Fertility rate is based on at-risk population • Thus, fertility rate can be constructed based on women age 15 to 44.

  15. Fertility Rate • In 2001 the fertility rate in the U.S. was 65.3 per 1000 • An approximation can be obtained by • Multiply by 2 the birth rate • 14.1 X 2 = 28.1 (account for about 50% being male) • 28.1 X 2.3 = 64.63 (for about little more than 50% of the population of female population being under 15 or older than 44

  16. Fertility Rate • Age specific • Non-marital fertility rates • Sub groups: • By race • Ethnicity • etc

  17. Total Fertility Rate • Total Fertility Rate (TFR) • TFR = 5 (FR10-14 + FR15-19 + FR20-24 +… + FR45-49) • In 2001 in the US the TFR was 2034

  18. Zero Population Growth • Zero Population Growth (ZPG) • ZPG is obtained when TFR = 2130 • This is because 50% births are male • And some women either die or do not have children, hence TFR > 2000 • In the US ZPG < 0

  19. TERM DEFINITION AND FORMULA VALUE NUMBER OF BIRTHS - 4.03MILLIONS BIRTH RATE BIRTHS PER 1000 POP = (BIRTHS/POP) * 1000 14.1 FERTILITY RATE BIRTHS PER 1000 WOMEN, AGE 15-44 = (BIRTHS/NUM. OF WOMEN, AGE 15-44) * 1000 65.3 NONMARITAL FERTILITY RATE BIRTHS PER 1000 UNMARRIED WOMEN, AGE 15-44 = (BIRTHS TO UNMARRIED WOMEN/ NUM. UNMARRIED WOMEN, AGE 15-44) * 1000 43.8 TOTAL FERTILITY RATE NUMBER OF LIFETIME BIRTHS TO 1000 WOMEN IF THEY HAD CURRENT AGE-SPECIFIC FERTILITY RATES 2034 MEASURES OF US FERTILITY, 2001

  20. 5 4 3 2 200 150 100 50 FERTILITY RATE (LEFT SCALE) # BIRTHS (RIGHT SCALE) FERTILITY RATE (BIRTHS/1000 WOMEN) TOTAL BIRTHS (MILLIONS 1940 1960 1980 2000 Baby Boom vs. Baby BustUS FERTILITY RATE AND TOTAL BIRTHS, 1940-2001

  21. US FERTILITY RATE BY RACE AND ETHNICITY, 2001

  22. 1970 1995 AUSTRIA 2.3 1.4 FRANCE 2.5 1.7 GERMANY 2.0 1.3 ITALY 2.4 1.3 PORTUGAL 2.8 1.4 RUSSIAN FERDERATION 2.0 1.4 SWEDEN 1.9 1.7 UNITED KINGDOM 2.4 1.7 BIRTHS PER WOMAN, SELECTED EUROPEAN COUNTRIES, 1970 AND 1995

  23. FertilityModern Economic Approach • Preferences • Demand for Child Services • Quantity • Quality U = U (CS, A) where A are all other goods

  24. FertilityModern Economic Approach • Production • Child Services production function • CS = F(T,Z) • Where T is the Time involved and • Z the cost of purchasing things for them

  25. FertilityModern Economic Approach • COST • Opportunity Cost • CCS = C( WM, WF, PZ ) • Changes in Costs • Δ PCS / Δ WM > 0 • Δ PCS / Δ WF > 0 • Δ PCS / Δ PZ > 0

  26. FertilityModern Economic Approach • Price • PCS CCS = C( WM, WF, PZ ) • Full Income • YF = ( WM X T ) + ( WF X T) + V • DEMAND FOR CHILDREN • CS* = D (PCS, PA, YF, Preferences)

  27. FertilityModern Economic Approach:Comparative Statics • A Change in Full Income Effects • Income Effect Ξ Δ CS* / Δ YF > 0 • A Change in the Wage Rate • Substitution Effect Ξ Δ CS* / Δ WF < 0 • Assuming constant YF

  28. PRICE OF CHILD SERVICES D1 Do P1 P0 AMOUNT OF CHILD SERVICES DEMANDED CS’ CSo CS1 HOW AN INCREASE IN THE WAGE RATE AFFECTS THE AMOUNT OF CHILD SERVICES DEMANDED

  29. (A) (B) PRICE PRICE D1 D1 Do Do P1 P1 P0 P0 CHILD QUANTITY CHILD QUALITY N’ L’ Lo L1 No N1 THE EFFECT OF AN INCREASE IN THE WAGE RATE ON THE QUANTITY AND QUALITY OF CHILDREN

  30. THE EFFECT OF AN INCREASE IN THE WAGE RATE ON THE QUANTITY AND QUALITY OF CHILDREN • Δ PL / Δ N > 0 • Δ PN / Δ L > 0

  31. WAGE CHANGE PRICE OF CHILD SERVICES FULL INCOME INCREASE INCREASES, TO THE EXTENT THAT THE INDIVIDUAL WITH THE HIGHER WAGE CONTRIBUTED TO PRODUCTION OF CHILD SERVICES INCREASES DECREASE DECRASES, TO THE EXTENT THAT THE INDIVIDUAL WITH THE LOWER WAGE CONTRIBUTED TO PRODUCTION OF CHILD SERVICES DECREASES THE IMPACT OF WAGES ON THE PRICE OF CHILD SERVICES AND FULL INCOME

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