Altruism, Macroeconomic Aggregates and the Cyclical Behavior of Fertility : Theory and Evidence from U.S. Data

Using U.S. data for 1976-2013, this paper studies the effects of various macroeconomic variables, particularly the national debt, government budget deficits and taxes, on fertility decisions over the business cycle. A rise in the debt-GDP ratio, government spending-GDP ratio and the deficit-GDP ratio reduces fertility. On the other hand, a fall in the tax revenues-GDP ratio is associated with lower fertility rates. These results hold even after controlling for other potential determinants of fertility such as the female participation rate in the labor force, inflation rate, GDP growth rate, urbanization rate, female life expectancy, marriage rate and divorce rate. I then show that these findings can, to a large extent, be explained by an overlapping generations model with altruism, and that abstracting from altruism delivers results that are at odds with the data