Inverse J Effect of Economic Growth on Fertility: A Model of Gender Wages and Maternal Time Substitution

This paper presented a model where economic growth, via growth in female wages relative to male wages, encouraged households to raise paid female labor supply and have more children by substituting child care for maternal time. A threshold logarithm per capita output, above which fertility decline reverses, was predicted to depend on subsidized child care, maternity pay, and the value placed on children and maternal time spent rearing children. The predictions explained recent evidence and identified cross country differences in gender wages, family policy and willingness to substitute maternal time in childrearing as important factors in an inverse J-shaped effect of economic growth on fertility. The analysis was robust to the introduction of education and cost sharing among children in child rearing. Economies of scale in child rearing reduced the threshold logarithm of per capita output. Demand for child quality continued to rise with wages despite fertility decline reversal.