Inverse J effect of economic growth on fertility: a model of gender wages and maternal time substitution

Author name: 
Day C

This paper presents a model where economic growth, via growth in female wages relative to male wages, encourages households to raise paid female labor supply and have more children by substituting child care for maternal time. A threshold logarithm per capita output, above which fertility decline reverses, depends on subsidized child care, maternity pay, and the value placed on children and maternal time spent rearing children. The predictions explain recent evidence and identify cross country differences in gender wages, family policy and willingness to substitute maternal time in child rearing as important factors in an inverse J-shaped effect of economic growth on fertility. The analysis is robust to the introduction of education and cost sharing among children in child rearing. Economies of scale in child rearing reduces the threshold logarithm of per capita output. Demand for child quality continues to rise with wages despite fertility decline reversal.

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