Working Paper: NBER ID: w30937
Authors: Lisa J. Dettling; Melissa Schettini Kearney
Abstract: We revisit the cyclical nature of birth rates and infant health and investigate to what extent the relationship between aggregate labor market conditions and birth outcomes is mitigated by the consumption smoothing income assistance delivered through unemployment insurance (UI). We introduce a novel empirical test of standard neoclassical models of fertility that directly tests the prediction of opposite-signed income and intertemporal substitution effects of business cycles by examining the interaction of the aggregate unemployment rate with a measure of potential income replacement from UI. Our results show that as UI benefit generosity reaches 100 percent income replacement, there is no effect of the unemployment rate on fertility rates. This implies that the well-documented cyclical nature of fertility rates is about access to liquidity. We also provide novel evidence that infant health is countercyclical based on timing of conception, but procyclical based on time in utero. The negative relationship between the in utero aggregate unemployment rate and infant health also disappears when potential UI replacement rates reach 100 percent. Our results indicate that the social insurance provided by UI has a pro-natalist effect and improves babies’ health.
Keywords: birth rates; infant health; unemployment insurance; liquidity; economic conditions
JEL Codes: H51; I18; J11; J13; J18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Access to liquidity (G19) | Fertility decisions (J13) |
| Higher unemployment rates in utero (J79) | Higher incidences of low birth weight and preterm births (J13) |
| Unemployment Insurance (UI) benefits reach 100% income replacement (J65) | Negative relationship between unemployment rate and infant health outcomes diminishes (J79) |
| UI (Y10) | Pronatalist effect and improved infant health (J13) |
| Unemployment Insurance (UI) benefits reach 100% income replacement (J65) | Negative impact of unemployment on fertility rates disappears (J19) |
| Unemployment rate (J64) | Fertility rates (J13) |
| Unemployment rate in utero (J64) | Infant health outcomes (I14) |