Income Redistribution and Fertility Decline: A Skeptical View

Abstract

This paper reviews the microeconomic and macroeconomic evidence offered by Repetto and others in support of the hypothesis that income redistribution decreases fertility and concludes that there is no support for this proposition. Proponents of this approach argue that since fertility tends to be negatively associated with income in developing countries and in a nonlinear way a small increase in the income of a poor couple reduces fertility more than a small increase in the income of a rich couple. The nature of fertility responses to changes in exogenous variables can only be determined empirically. Repettos statistical analysis of household data from Puerto Rico and Korea in support of the theory that income redistribution reduces fertility contains important theoretical and econometric errors. 1st total household income cannot be considered an exogenous variable since the wifes hours of work and earnings are determined simultaneously with decisions about fertility. 2nd use of a per capita income measure may introduce a spurious nonlinearity into the income-fertility association. To explore the fertility-income distribution relationship using a more satisfactory specification of the fertility equation the author analyzed the socioeconomic determinants of the number of children ever born and the number of living children in a sample of women drawn from the 1973 Philippines National Demographic Survey. This analysis suggested that marginal transfers of income from the rich to the poor actually increase fertility although the increase is small. Since levels and trends in fertility and mortality and in fertility and mortality differentials by socioeconomic class can affect income distribution over time it is not possible to conclude from a simple positive correlation between fertility and income inequality among nations that reductions in income inequality reduce fertility. In addition it is difficult to determine whether the statistical association between income distribution and fertility among nations is a causal association or a spurious correlation reflecting underlying and unmeasured social and economic factors.

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