Women's wages and fertility revisited. Evidence from Norway

Tom Kornstad, Statistics Norway
Marit Rønsen, Statistics Norway

Since the 1960s, Beckers’ New Home Economics has provided a central theoretical framework for studies of fertility behaviour. Crucial determinants of this theory are the family’s budget constraint and the cost of a(nother) child. Since the mother is usually the main care-giver, the largest component of the cost of a child is her foregone earnings. Thus, New Home Economics predict a negative relationship between female wages and fertility. This prediction has been tested in a number of studies over the past decades, but the results are far from unanimous. In this paper we review past evidence of the impact of female wages on their childbearing behaviour and discuss possible sources for the divergent results. Moreover, we supply new evidence from Norway based on data from the last two decades. Norway is an interesting country in this respect since Norwegian women differ from their “sisters” in many other countries by combining high fertility with high labour market participation. The analysis is carried out by estimating a hazard rate model of birth transitions including the predicted wage as a time-dependent variable together with other variables that are known to affect fertility behaviour. We use a rich Norwegian register data set (1988-2008) with information on the dates of birth of all children over the life-cycle linked with information from the Labour Force Survey, and plan to model the transition to first, second and third birth, using a discrete hazard rate model. As a point of departure we will estimate the various fertility transitions separately, but will also consider modelling the transitions simultaneously. Heckman’s selection model is used in the estimation of the wage equations.