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

It is generally accepted that lower population growth is associated with positive economic development. Although there is a large body of literature supporting this hypothesis at the macro level, few studies have analyzed the causal e®ect of fertility on household welfare at the micro level. In this paper we present an empirical analysis of the relationship between household welfare and fertility for Indonesia - a country which has experienced unprecedented economic growth and sharp fertility declines over recent decades. The focus of our paper is twofold: 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 welfare at the household level. When consumption expenditure per person is used as a measure of welfare, the analysis suggests that the correlation between fertility and household welfare is sensitive to the choice of the parameters governing economics of scale and equivalence scales at the household level. The lower these values are the less likely will an additional child depress household welfare. On the other hand, when the share of food in total expenditure is used as a measure of welfare, the result does not produce a decisive sign of the correlation between fertility and household welfare.