Population and Economic Change
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class_note_week_4.docx
The general fertility rate is measured differently from the birth rate, with the denominator showing not mid-year population, but the mid-year population of females of childbearing age.
General fertility rate = (# births/midyear population of females aged 15-49) x 1000
Age-specific fertility rates (ASFR) give even more precision as to the age. For example, the (age-specific) fertility rate for females 15-19 years old ≡ number of live births to 15-19 year olds during the year / mid-year population of female 15-19 year olds, all multiplied by 1000.
Though in general, age-specific fertility rates have been dropping in Canada, an exception is the fertility rate for women over 30. Those rates have been rising since the late 70s. In fact, the average age of mother has been rising since the late 70s (see Figure 28-4).
Figure 28-1. Age-Specific Fertility Rates, Canada
Source for data: Statistics Canada, “Fertility rate by age group, Canada, 1926-2008” in Fertility: Overview, 2008, http://www.statcan.gc.ca/pub/91-209-x/2011001/article/11513-eng.htm downloaded October 31, 2013.
Once a woman, or a group of women born the same year, is no longer of child-bearing age, we can record how many children were born to that woman or cohort. We can compute the “completed fertility rate (CFR)” which is children per woman, for that group of women.
CFR = # children born to a group of women/ number of women in the group
For example, for women born in 1946, the completed fertility rate was 2.1, i.e. 2.1 children per woman.
But that is looking into the past. To get an idea of how many children today’s women will have, demographers compute a hypothetical statistic called the total fertility rate (TFR). The total fertility rate is the number of children which would be born to the average woman IF the average woman experiences today’s age-specific fertility rates at each age of her life. This is not completely realistic. In 2010, 25-year old women will behave as predicted by the 2010 fertility rate for 25-year old women. But by 2015, when the women are now 30, we cannot expect their fertility to match the fertility of 30-year-old women in 2010. They will make their own decisions.
TFR = ∑ ASFR over all age groups x 5 / 1000
where ASFR is age-specific fertility rates
“5” represents the 5 years a woman spends in the typcial age group. Age groups are usually 5 years in length e.g. 15-19, 20-24, 25-29 etc.
Why do we divide by 1000? Well, the ASFR gives you the number of children per 1000 women of that age, say 130 children. Now one woman cannot have 130 children. Only 1000 women can. So we divide by 1000 to get the children per woman.
Figure 28-2. Total Fertility Rate, Canada
Source: WDI Online, World Bank Group
As you can see in the Figure above, Canada's TFR was about 1.5 in 2005. It was slightly higher, at 1.58, in 2010.
If we were to count only the female babies in our ASFR, and then compute TFR, we would have the Gross Reproduction Rate, or number of female babies per woman. If we went a step further and multiplied the female baby ASFR by the probability of a female baby living to its mother’s age group, we would have the Net Reproduction Rate. A population is self-sustaining if its NRR is greater than or equal to one.
Instead of using NRR, we usually compute TFR and consider a TFR of 2.1 to be sufficient for a population to be self-sustaining. A TFR=2.1 is considered “the replacement rate” or “replacement fertility”. The last Canadian cohort to achieve a CFR of 2.1 was the women born in 1946. Subsequent cohorts of women have had fewer than 2.1 children per woman.
Tempo-adjusted TFR
Because TFR exaggerates fertility decline when the age of the mother is increasing, demographers have developed a tempo-adjusted TFR.
Adjusted TFR (t) = TFR (t)/ (1-r(t) )
where r(t) measures the influence of postponing fertility.
r(t) =
average age of woman giving birth (t+1) – average age of woman giving birth (t-1)
Demographers refine this calculation by first computing TFR for one kind of child: eldest, second, third, etc. Such a TFR is called a birth-order specific TFR.
Figure 28-3. Fertility trends in the Czech Republic, showing tempo-adjusted TFP.
Source: Philipov and Sobotka (2006)
In Figure 28-3 we see that, when adjusted for the increasing age of mothers, Czech fertility rates are higher than they originally appeared to be.
Figure 28-4. Average age of mother at childbirth, Canada, various years.
Source: Human Resources and Skills Development Canada, 2011.
Determinants of Fertility
Fertility, or how many children per female are born, depends on three things: opportunities for intentional or unintended procreation; intentions; and ability to carry out those intentions.
The decision maker is usually a heterosexual couple relying on their own powers of procreation. In some cultures, the parents of the husband traditionally have influenced a couple’s fertility decisions. Modern western couples have great autonomy in fertility. Greater personal freedom, greater social tolerance of unusual families, and medical technology have united to make it possible for infertile couples, homosexual couples, and singles to become parents.
Opportunities
Procreation, both intentional and unintentional, requires one man and one woman. There is now the possibility of women using sperm banks to conceive, or a couple using a surrogate mother to carry a child to term. Traditional factors governing the union of men and women include the degree of social isolation of men or women; sexual activity rates; the sex ratio; the usual age at marriage or cohabitation; types of marriage (e.g.polygamy vs. monogamy); absence of spouse; likelihood of bereavement, separation, or divorce; and time between unions.
Social and religious norms, income, geography, and political crises influence these things. Generally speaking, prosperity, peace, and secularization mean greater opportunities for coupling and conception.
Intentions
For the decision maker(s), the target number of children depends on personal preferences, social and religious norms, and economic considerations. It also depends on a person's experience of childhood and of raising any previous children. When infant and child mortality is high, extra children may be born in order to achieve the target number.
Extra children are sometimes born to achieve a target number of children with particular characteristics. In the past, one had to “keep trying” until one had the requisite number of boys, girls, healthy children etc. Now genetic testing in utero is making selection easier, and reducing overall fertility. It is ironic that, just when we are treating peoploe with disabilities with dignity,and making it easier for them to take their place in society, we have the means, and often the will, to make sure they are never born.
Even before modern birth control methods were available, when contraception was limited to herbal teas, abstinence, and withdrawal, major declines in fertility took place in industrializing societies as the demographic transition progressed. For example, births per year per married woman in France fell from 0.775 in 1740 to 0.410 in 1891 to 0.273 in 1931 (Wrigley, 1985). Scholars collaborating on the European Fertility History Project in the 1960s produced nine books on the demographic transition in Europe. They concluded that secularization, more than anything else, was associated with falling fertility rates. Thus, fertility fell in European provinces where infant mortality was still high, and where income per person had not yet risen appreciably, if those provinces were integrated with more secularized provinces sharing the same language and culture.
Secularization of a culture occurs as society organizes itself along non-religious lines. The government, the courts, schools, and the like adopt a neutral religious stance. Secularization encourages education, personal development, and decision making without reference to religious authority. It encourages individualism, sometimes at the expense of the community.
Ability to achieve intentions
Although Europeans were able to reduce fertility without modern birth control methods, it is no doubt easier to limit family size today.
Birth control includes contraceptive methods, sterilization of the male or female, and abortion. Abortion continues to arouse serious concern, especially for religious thinkers. The use of abortion to select for boys troubles secular thinkers too. Infanticide, neglect, and abandonment may be forms of delayed birth control.
Some parents, while wishing to reduce family size, reject some or all methods of birth control on moral or medical grounds. Others are ignorant of birth control methods or find them inaccessible. Others simply procrastinate or lack the discipline to use any method of birth control consistently.
The “fertility trap” refers to the phenomenon of delaying child-bearing - perhaps because of a shock such as the collapse of Communism and its parental support programs - until the parents’ fertility has declined or there are simply too few years to give birth to the number of children originally desired. The new, smaller-than-intended families foster new social norms about family size, parental age, and parental career development leading to continuation of the small-family pattern.
Indeed, it is infertility – difficulty conceiving a child – that is perhaps the greatest barrier today to achieving desired family size. Parents must be healthy and physiologically able to conceive a child and carry it to term. Breastfeeding, malnutrition, disease, excessive exercise and stress can interfere with conception and pregnancy. Adoption and fostering are alternative ways to building a family. Adoption and fostering are not part of fertility, but they do contribute to a healthier, more emotionally resilient population.
Economic prosperity makes it easier for people to manage their health and to access birth control. It therefore enhances the ability of parents to achieve a desired family size. However, recent history suggests that intended family size may shrinks with secularization and economic growth.
Economic Influences on Desired Family Size
What benefit and cost considerations affect the number of children a family chooses to have?
Children providing material benefits
First we might ask whether children provide any material benefits to parents. In various times and places children may have been perceived as a net material benefit to parents. Children can work for the family and children can care for their parents when parents are no longer able to work themselves.
In her book on British children brought to Canada, Joy Parr notes that children under the age of 14 could not be boarded out at a profit. Becker (1960) mentioned a finding that male slaves were a net expense to American slave owners until those slaves were about 18 years of age. However, children of about 8 years of age and older have worked in sweatshops and on plantations as long as poverty has existed. Today their tiny fingers weave carpets in Afghanistan and their tiny bodies wriggle through diamond tunnels in Tanzania. At some point they may yield a net profit to their parents.
Whether or not money can be recouped from children before they reach adulthood, adult children can represent a safety net for parents. In societies where healthcare is unsubsidized, insurance is unaffordable, and pensions are inadequate, parents may look to children to meet the needs of their aging. However, in such societies, the capital:labour ratio is likely to be low, and the returns to additional capital greater than the returns to additional labor. If therefore the government could create reliable capital markets, safe vehicles for savings, insurance programs, and pension plans, citizens would dare divert money away from children and toward investments that would provide greater material benefit for themselves and their society.
In this day and age - urban, prosperous, and human rights-oriented - it seems more natural to look at children providing an emotional rather than a financial benefit to their parents.
Children providing psychic benefits to their parents
With children providing “utility” we could use the economic framework of utility maximization within the limits of a budget and a 24 hour day. The decision maker’s constrained utility maximization results in a desired number of children as well as a desired amount of alternative goods and leisure opportunities. The key determinants of the demand for children are income, the cost of children, the cost of substitute goods, and the cost of complementary goods. This is a crass, incomplete, but suggestive approach to understanding the fertility decision.
This approach assumes that children are actually “goods”, i.e., that more children are preferred to fewer. Is this indeed the case?
The following figure uses a large 2007 survey of american heterosexual couples where the female is under 55 years of age.
Figure 30-1. Average number of children, by income rank of families.
A brief glance at Figure 30-1 above suggests that, inasmuch as children are “goods” which enter a parent’s utility function, it is not clear they are normal goods, i.e. goods which are purchased in greater number as income rises. Roughly speaking, lower income families have more children. We also observe that lower income countries have more children than higher income countries.
Willis (1973) developed a detailed model of parental choice. In Willis’ model, each parental unit maximizes utility which depends on the N, the number of children; Q, the level of childhood “quality” for each child which costs time and money; and S, an alternative activity such as skiing. Parents choose between spending on skiing (S) or on child services (N*Q).
Each parental unit also faces constraints. Parents have wage income, and a limited amount of time which for one of the parents – traditionally, the woman - is allocated between work and childcare. Her wage depends on her initial level of skill and her experience in the workforce. Time spent with children means no wage now and a lower wage in the future.
Note that Willis' model is not appropriate for a less-economically-developed nation. Children provide no labour. And there is no consideration of what happens to parents in their old age when they cannot work and when perhaps there is no government support for them.
In Willis' model, if there is an increase in endowment income, and child services is a normal good, the parents will want more child services (NQ). However, we do not know whether more child services means more children, or more money spent on each child. The more they spend on existing children, the more expensive additional children will be, if parents want to treat all children equally. If parents get richer, they might likely choose to increase Q without increasing N. We can thus have increases in income translating into fewer children without children being “inferior goods”.
It is possible that for some people, children are indeed inferior goods, to be foregone or abandoned if more exciting opportunities come along. Another way to explain falling fertility rates for higher income people and nations is that, for them, children are not needed for material benefits, only for psychic ones.
According to Willis’ model, the following things make it likely fewer children will be desired:
-a decrease in the cost of S, where S is a substitute for childservices
-an increase in the time or money cost of NQ
- a high desired Q for each child.
-any decrease in the father’s lifetime earnings.
-if child-rearing is more time-consuming than S, but less expensive than S, an increase in the mother’s wage.
Did you notice the difference between the effects of the father’s and mother's earnings? The father’s earnings were assumed to be independent of the time spent raising the children. Since the father’s time was not the subject of optimal allocation between work and children, it could be treated as manna from heaven, a source of “endowment income” that allows more of everything to be acquired.
The mother’s earnings, however, involve a tradeoff: less time spent at home. They have an opportunity cost: time spent with children.
Substitution and Income Effects
Recall from microeconomic theory that when the price of something changes, there is an income effect and a substitution effect. Consider an example. When the price of apples rises, you switch to cheaper fruits. This is the substitution effect. From the point of view of a consumer, you feel poorer because your purchasing power has fallen. You buy fewer apples and fewer of any goods that are normal. This is the income effect, which, for consumers, works in the same direction as the substitution effect.
For a vendor, however, the substitution and income effects work in opposite directions. A vendor of apples, when snacking, will buy cheaper fruits when the price of apples rises. The substitution effect causes him to buy fewer apples. However, a rising price of apples will make the vendor richer and he or she will buy more apples and more of any other normal goods. The income effect causes a seller of apples to buy more apples, not fewer.
When a potentially care-giving parent is offered a wage increase, there are two effects. The substitution effect tells the parent to work more now that the price (opportunity cost) of her time has risen, and childcare at home is now more expensive. However, the income effect makes her, as a vendor of time, feel richer, and able to afford more time spent with kids. If her partner’s wage rises, again she experiences the income effect telling her she can afford more time with the kids.
At low wages, the income effect is probably less powerful than the substitution effect. So a wage increase leads the parent to work more/spend less time with children. At high wages the income effect may be larger than the substitution effect, so that the parent decides to spend more time at home or have more children.
T. Paul Schulz, a famous development economist, wrote that, “There is an inverse association between income per adult and fertility among countries, and across households this inverse association is also often observed. Many studies find fertility is lower among better educated women [implying that the substitution effect outweighs the income effect] and is often higher among women whose families own more land and assets [a pure income effect].”[footnoteRef:2] [2: Schultz (2005).]
Figure 30-2 shows a declining number of children for wealthier families, apparently contradicting the positive income effect we have postulated.
Figure 30-2. Average number of children by wealth rank of families.
Data source: PSID (2009). All heterosexual couples with a woman less than 55 years of age.
The effect of the wife’s wage on number of children is obscure. A strong substitution effect is not observed.
Figure 30-3. Average number of children for families ranked by size of wife’s wage.
Source: PSID (2009). All heterosexual couples with a woman less than 55 years of age
The Economist (August 8, 2009) describes the research of Myrskyla et al. (2009), which suggests the income effect becomes dominant for countries with high socioeconomic performance. Graphing the total fertility rate against the United Nations’ Human Development Index (HDI)[footnoteRef:3] for 240 countries, the authors observed that fertility fell as HDI increased, but only up to a score of about 0.9. For most countries, Canada and Japan excepted, whose HDIs exceed 0.9,TFR increased as the HDI increased. [3: HDI is an index of life expectancy at birth, income per person, and education levels achieved]
Abeysinghe (1993) studied Canadian fertility and used statistical analysis to correlate wages, income, and the number of children. He concluded that when it comes to female wages, the substitution effect outweighs the income effect of a wage increase, and higher females wages mean fewer children. On the other hand, there is a pure income effect which favours children: men whose incomes compared favourably to their parents had more children.
Although age-specific fertility rates and the total fertility rate fell when female wages rose, the drop in fertility seems to be temporary. That is, higher wages cause women to postpone rather than to avoid childbearing. Abeysinghe found that the female wage rate was not much correlated with the completed fertility rate. Tempo-adjusted TFR would not be as sensitive to female wages as TFR itself.
Not everyone who postpones having kids will find the time or partner, or be fertile enough to have kids later. (Recall the "fertility trap".) However, many of them will be able to have their children later on. Inasmuch as that is the case, TFR underestimates CFR.
Business Cycle Effects
If higher wages are associated with fewer children, at least temporarily, we would expect fewer births during economic boom times, and more children during recessions. However this is not what happens. TFR rises during economic expansions. Mocan (1990) attributes most of this effect to the fact that during economic expansions the age at marriage falls and the divorce rate falls. He believes that fertility itself is slightly countercyclical due to rising wages as predicted by the substitution effect.
In conclusion
When asked how income affects fertility, we must distinguish between three different aspects of income:
Table 30-1. Aspects of income which affect fertility.
|
Wealth |
A pure income effect increases the money and time spent on children. Some studies suggest that the number of children rises.
|
|
Higher wages, better employment possibilities for the caregiving parent(s) |
The substitution effect prevails at lower wages. If wages become high enough, the income effect may prevail leading to greater fertility. However, higher wages are usually associated with fewer children. TFR falls but tempo-adjusted TFR might not fall as much. |
|
Higher wages during economic boom |
The higher wages might lead to fewer children if it were not the case that divorce rates fall and people get married earlier during economic booms. Expect an increase in TFR. |
|
Economic development apart from wealth or higher wages |
· reduced reliance on children for labour · reduced reliance on children for old age security · improved infant and child survival · improved education and awareness of career options, birth control · improved access to birth control and to infertility treatment. · secularization Overall, economic development appears to decrease fertility until high levels of development are reached. |
Canada’s Fertility Rate, 1960-2007
total fertility rate 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 3.8110001087188721 3.753000020980835 3.6809999942779541 3.6070001125335693 3.4560000896453857 3.1150000095367432 2.749000072479248 2.5280001163482666 2.3859999179840088 2.3340001106262207 2.2579998970031738 2.1410000324249268 1.9800000190734863 1.8899999856948853 1.8370000123977661 1.8240000009536743 1.7960000038146973 1.781999945640564 1.7400000095367432 1.7000000476837158 1.690000057220459 1.6799999475479126 1.6499999761581421 1.6699999570846558 1.6799999475479126 1.6799999475479126 1.7699999809265137 1.8300000429153442 1.7000000476837158 1.7100000381469727 1.7000000476837158 1.6390000581741333 1.5920000076293945 1.5499999523162842 1.4900000095367432 1.5199999809265137 1.5299999713897705 1.5299999713897705 1.5399999618530273 1.5900000333786011 1.5900000333786011
