Relative Wage Changes and Timing of Fertility

The U.S. wage structure experienced substantial changes due to energy price shocks, increased international competition, and technological change. Katz and Murphy (1992) among others have argued that these changes reflected a rise in demand for more skilled workers and also females. In this paper I use these types of relative wage changes to identify the effects of women’s wages and husbands’ earnings on fertility. I utilize 1984-2001 Survey of Income and Program Participation panels to construct individual fertility histories and NCHS birth certificates data to construct age-specific and total birth rates. I examine the impact of the woman’s wage and husband’s earnings (potential husband’s earnings in the case of single women) on the timing and spacing and on the age-specific and total birth rates. Since unobserved heterogeneity is a concern in the individual level regressions, I use state, region and education specific wage trends constructed from the CPS Outgoing Rotations data to identify the effect of female wages and male earnings. Results using individual and group-level earnings both indicate that a higher female wage leads to a delay of first births. A 10% rise in the women’s wage causes approximately a 1.5 to 4% reduction in the probability of giving first birth over the next 4 months. Male earnings do not play an important role for the timing and only increase the probability of second births among younger women. Results with grouped data on age-specific and total birth rates suggest that higher female wages delay births among the younger women but have no effect on total fertility. These findings are consistent with previous papers, which have found that female wages have greater effect on fertility than male incomes (Heckman and Walker, 1990; Merrigan and St. Pierre, 1998).