The Impact of Unemployment on Fertility Timing

Signe Hald Andersen, Rockwool Foundation Research Unit, Denmark
Berkay Ozcan, London School of Economics and Political Science (LSE)

We analyze the causal effect of unemployment on fertility. Neoclassical theory of fertility has ambiguous (both positive and negative) predictions regarding the effect of unemployment for women. Additionally, existing empirical research shows contradictory results and makes a weak case for exogeneity of unemployment and fertility behavior. We suggest that (unexpected) firm closure constitutes an exogenous source of unemployment and adopt it as an instrument to estimate husbands’ and wives’ fertility response, using a unique administrative panel data from Denmark, which includes all residents in Denmark between 1982 and 2006. It contains monthly information about employment, relationship and a very-detailed fertility histories -including still births and miscarriages- of individuals as well as information about the firms that they work in. We estimate our models separately for men and women. Our preliminary results provide evidence against the substitution effect for women and show that women delay childbirth in the event of unemployment.