Childrens‘ expected income consequences and fertility behavior in cross-national comparison

Declining fertility has turned from blessing to curse after the end of industrial society, and, for a number of reasons from cultural heritage to welfare state financing, post-industrial societies struggle to understand and potentially to reverse the decline in the number of babies born.

One general argument relating to the decline in children is related to the negative income effect of children: Especially for women, raising children needs resources which could be used either in investment processes in human and social capital or directly in the generation of income and consumption (Becker 1981). Individuals are proposed to contrast their expected economic situations with and without children: the difference between both is a cost which is compared with the utilities derived from having kids.

This choice situation is interesting for researchers and policymakers since the difference between the economic situation with and without children is the subject of a number of policy measures from family allowances over tax deductions for childcare and publicly offered childcare to policies for gender-equality. However, although empirical research has used a number of methods to measure and understand fertility and its relation to diverse policy measures, studying this general argument in its two sub-aspects mentioned and in a comparative framework is yet a gap in the literature.

It is a question especially interesting for comparative research since both sides of the research question are of interest in comparing welfare states and the behavior of their citizens: Is fertility influenced by income differences, is it influenced uniformly over time, societies, and individual characteristics? What interactions exist between fertility and the expected income consequences? Does the effect on disposable income count alone or are the effects on other parts of the income likewise or even more important?

The paper addresses these questions based on Luxembourg Income Study data.