Working Paper: NBER ID: w17485
Authors: Lisa J. Dettling; Melissa Schettini Kearney
Abstract: This project investigates how changes in Metropolitan Statistical Area (MSA)- level housing prices affect household fertility decisions. Recognizing that housing is a major cost associated with child rearing, and assuming that children are normal goods, we hypothesize that an increase in house prices will have a negative price effect on current period fertility. This applies to both potential first-time homeowners and current homeowners who might upgrade to a bigger house with the addition of a child. On the other hand, for current homeowners, an increase in MSA-level house prices will increase home equity, leading to a positive effect on birth rates. Our results suggest that indeed, short-term increases in house prices lead to a decline in births among non-owners and a net increase among owners. The estimates imply that a $10,000 increase leads to a 5 percent increase in fertility rates among owners and a 2.4 percent decrease among non-owners. At the mean U.S. home ownership rate, these estimates imply that the net effect of a $10,000 increase in house prices is a 0.8 percent increase in current period fertility rates. Given underlying differences in home ownership rates, the predicted net effect of house price changes varies across demographic groups. In addition, we find that changes in house prices exert a larger effect on current period birth rates than do changes in unemployment rates. This project investigates how changes in Metropolitan Statistical Area (MSA)- level housing prices affect household fertility decisions. Recognizing that housing is a major cost associated with child rearing, and assuming that children are normal goods, we hypothesize that an increase in house prices will have a negative price effect on current period fertility. This applies to both potential first-time homeowners and current homeowners who might upgrade to a bigger house with the addition of a child. On the other hand, for current homeowners, an increase in MSA-level house prices will increase home equity, leading to a positive effect on birth rates. Our results suggest that indeed, short-term increases in house prices lead to a decline in births among non-owners and a net increase among owners. The estimates imply that a $10,000 increase leads to a 5 percent increase in fertility rates among owners and a 2.4 percent decrease among non-owners. At the mean U.S. home ownership rate, these estimates imply that the net effect of a $10,000 increase in house prices is a 0.8 percent increase in current period fertility rates. Given underlying differences in home ownership rates, the predicted net effect of house price changes varies across demographic groups. In addition, we find that changes in house prices exert a larger effect on current period birth rates than do changes in unemployment rates.
Keywords: house prices; fertility; real estate market; demographic decisions
JEL Codes: D1; J13; R21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| House Prices (R31) | Unemployment Rates (J64) |
| House Prices (R31) | Fertility Rates (Non-Owners) (J19) |
| House Prices (R31) | Fertility Rates (Homeowners) (R21) |
| House Prices (R31) | Current Period Fertility Rates (J13) |
| House Prices (R31) | Birth Rates (J11) |
| Unemployment Rates (J64) | Birth Rates (J11) |