Does Fertility Decrease the Welfare of Households? An Analysis of Poverty Dynamics and Fertility in Indonesia

Abstract

It is generally accepted that lower population growth is associated with positive economicdevelopment. Although there is a large body of literature supporting this hypothesis at themacro level, few studies have analyzed the causal e®ect of fertility on household welfare atthe micro level. In this paper we present an empirical analysis of the relationship betweenhousehold welfare and fertility for Indonesia - a country which has experienced unprecedentedeconomic growth and sharp fertility declines over recent decades. The focus of our paper istwofold: First, we introduce and apply propensity score matching methods to study the rela-tionship between fertility outcomes and economic variables at the household level. Secondly,we explicitly test for the sensitivity of our results with respect to alternative measures of wel-fare at the household level. When consumption expenditure per person is used as a measureof welfare, the analysis suggests that the correlation between fertility and household welfare issensitive to the choice of the parameters governing economics of scale and equivalence scalesat the household level. The lower these values are the less likely will an additional childdepress household welfare. On the other hand, when the share of food in total expenditureis used as a measure of welfare, the result does not produce a decisive sign of the correlationbetween fertility and household welfare.

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