Exploring Fertility Expectations
Moore, Miranda Annette
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The past few decades have seen an incredible increase in the use of panel data to answer micro level questions in a variety of settings. This new longitudinal data has allowed economists to empirically explore many theoretical economic models. One area that has not been as extensively explored is the economics of fertility expectations. This paper uses data from the National Longitudinal Survey of Youth 1979 (NLSY79) to explore the fertility expectations of a cohort of women who were 14 to 21 years old in 1979.We begin by investigating the impact of changes in the woman's socioeconomic status on the probability that she changes her fertility expectations. While the majority of our predictions are supported by our analysis, divorcing or separating from a spouse yield contradictory results. We also found counterintuitive impacts of losing self health insurance purchased through any source other than a current employer and losing health insurance for a child.We continue by analyzing which factors influence fertility expectation. We find that the majority of the observable variables representing a woman's background characteristics and her current socioeconomic status (marital status and education) have significant effect on her fertility expectations, both in statistical significance and magnitude. Additionally these effects are largely consistent with generally held beliefs.Next we test whether women are operating under a model of pure rationality or a model of rationality with learning. We fail to accept that the model the NLSY79 women use to form their fertility expectations is consistent with the rational expectations (RE) hypothesis. Our results provide support for the theory that women form their fertility expectations under a model of rationality with learning. Although our results are mostly consistent with our predictions, experiencing a change in the source of your own or your child's health insurance yields contradictory results. Understanding how women form and change their fertility expectations is important for many aspects of economics. Demographers who use fertility expectations to make future population predictions and economists who model a woman's simultaneous or sequential decisions of how many children to have and the quantity of market labor to supply will benefit from a better understanding of the fertility expectations of women.