Economics of Fertility by xiaohuicaicai

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									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
    – But only 1 our of every 16 in the 15 to 44
   Nassau William
       Senior
September 26, 1790 - June 4, 1864
    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
            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….
  Thomas Robert
     Malthus

February 13, 1766-December
          29, 1834
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)
Thomas Robert Malthus
   Positive Checks      Preventive Checks
    – War                 – Moral Restraint
    – Famine              – Contraception
    – Pestilence          – Abortion
    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
      Fertility in Modern
         Economics
   Once again,
    – Gary Becker


   Demography
    – Study of population
                       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
                          births       4.03 million
    Birth Rate2001                                1.41 %
                     Total population 285 million
           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
         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
 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.
                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
           Fertility Rate
 Age specific
 Non-marital fertility rates

 Sub groups:
    – By race
    – Ethnicity
    – etc
      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
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
MEASURES OF US FERTILITY,
         2001
TERM                DEFINITION AND                 VALUE
                      FORMULA
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 =
                                                    65.3
                    (BIRTHS/NUM. OF WOMEN,
                         AGE 15-44) * 1000


NONMARITAL         BIRTHS PER 1000 UNMARRIED
                       WOMEN, AGE 15-44 =
                                                    43.8
FERTILITY RATE       (BIRTHS TO UNMARRIED
                    WOMEN/ NUM. UNMARRIED
                     WOMEN, AGE 15-44) * 1000



TOTAL FERTILITY       NUMBER OF LIFETIME
                    BIRTHS TO 1000 WOMEN IF
                                                    2034
RATE                THEY HAD CURRENT AGE-
                   SPECIFIC FERTILITY RATES
                       Baby Boom vs. Baby Bust
                       US FERTILITY RATE AND TOTAL BIRTHS, 1940-2001

                      200                               5
                                                                           FERTILITY
                                                                           RATE (LEFT
(BIRTHS/1000 WOMEN)




                                                                           SCALE)
                                                                           # BIRTHS




                                                            TOTAL BIRTHS
                                                        4                  (RIGHT SCALE)




                                                             (MILLIONS
                      150




                      100                               3




                       50                               2


                            1940   1960   1980   2000
US FERTILITY RATE BY RACE AND
       ETHNICITY, 2001

    HISPANIC                                              96


      BLACK                                   67.2


       WHITE                                65

ASIAN-PACIFIC
  ISLANDER
                                            64.2

    NATIVE
   AMERICAN
                                       58.1


                0      20      40      60            80   100
                    BIRTHS PER 1000 WOMEN, AGE 15-44
BIRTHS PER WOMAN, SELECTED EUROPEAN
       COUNTRIES, 1970 AND 1995

                   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          2.0      1.4
  FERDERATION
  SWEDEN           1.9      1.7

  UNITED KINGDOM   2.4      1.7
                   Fertility
Modern Economic Approach
   Preferences
    – Demand for Child Services
       Quantity

       Quality

        U = U (CS, A)
             where A are all other goods
                Fertility
Modern 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
                  Fertility
Modern 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
                    Fertility
Modern 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)
                     Fertility
     Modern 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
HOW AN INCREASE IN THE
WAGE RATE AFFECTS THE
   AMOUNT OF CHILD
  SERVICES DEMANDED
PRICE OF CHILD
   SERVICES

                  D1
          Do



   P1


   P0




                              AMOUNT OF CHILD
            CS’ CSo    CS1   SERVICES DEMANDED
   THE EFFECT OF AN
 INCREASE IN THE WAGE
 RATE ON THE QUANTITY
AND QUALITY OF CHILDREN
                  (A)                            (B)
 PRICE                         PRICE
                                                D1
         Do D1                         Do



 P1                            P1


                               P0
 P0



                          CHILD
          N’                                               CHILD
                 No     QUANTITY        L’ Lo        L1   QUALITY
            N1
   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
THE IMPACT OF WAGES ON THE PRICE OF
  CHILD SERVICES AND FULL INCOME

 WAGE        PRICE OF CHILD            FULL INCOME
 CHANGE         SERVICES



 INCREASE   INCREASES, TO THE EXTENT    INCREASES
            THAT THE INDIVIDUAL WITH
                THE HIGHER WAGE
                CONTRIBUTED TO
              PRODUCTION OF CHILD
                    SERVICES


 DECREASE   DECRASES, TO THE EXTENT      DECREASES
            THAT THE INDIVIDUAL WITH
                THE LOWER WAGE
                CONTRIBUTED TO
              PRODUCTION OF CHILD
                    SERVICES

								
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