Does Economic Growth Reduce Fertility? Rural India 1971-1999

In this paper, we use a newly available panel data set that constitutes a representative sample of rural India over the period 1971-1999 to examine the role of economic change as a source of fertility decline. We first develop a simple dynamic model of fertility choice that incorporates the possibility of cost-of-time effects, a quantity-quality tradeoff, and increased access to health and family planning services. This model is the used to structure the empirical analysis of fertility decision-making. A key feature of the empirical analysis is that it controls for household level fixed effects by linking households from different rounds of the survey. The results eliminating the family fixed effect provide strong support for the importance of increases in the value of time of women and of technical change-induced investments in child schooling that accompany economic growth in accounting for fertility decline, with little role for parental schooling. In particular, we find that aggregate wage changes, dominated by increases in the value of female wages, explain 39% of the decline in fertility over the 1982-1999 period. In combination, changes in agricultural productivity and agricultural wage rates explain fully 80% of the decline. Health centers are found to have had a significant effect on fertility but the aggregate increases in the diffusion of health centers in villages only explains 3.4% of the fall. In summary, our results suggest that the process of economic growth has had a major impact on fertility in India over the last two decades and that, given sustained economic growth that continues to raise wages and increase returns to human capital, the fall in fertility in India will persist for the foreseeable future. A demographic revolution now appears to have at least in part resulted from, rather than just accompanied, the green revolution.