March 2, 2021
The research team found strong evidence that the growth rate of conceptions declines very rapidly at the beginning of economic downturns and the decline starts several quarters before recessions begin. In other words, fertility is a leading economic indicator.
A fundamental driver of economic growth is population growth, which in turn is driven by the fertility rate. The United Nations places the “replacement rate” of the population at about 2 children per woman, and countries at levels significantly below that level are at risk of slower economic growth and fiscal stress from the financial challenges of maintaining the livelihoods of an aging populace.
Fertility itself responds to economic activity, with a large literature suggesting that fertility rises and falls as the economy expands and contracts, or that fertility is procyclical. But whether fertility is a leader or follower of economic activity had been an unsettled question.
In a new paper at The Economic Journal, Steve Lugauer, along with Kasey Buckles `00 and Daniel Hungerman of the University of Notre Dame, use data on more than 100 million births in the United States to examine whether fertility behavior anticipates economic recessions. They find strong evidence that the growth rate of conceptions declines very rapidly at the beginning of economic downturns and the decline starts several quarters before recessions begin. In other words, fertility is a leading economic indicator.
This result speaks to the importance of expectations in making fertility decisions, and opens up the possibility for policymakers to consider alternative, non-economic measures of behavior to forecast future economic activity.
Is Fertility a Leading Indicator?
Steven Lugauer, Associate Professor of Economics, Gatton College of Business and Economics at the University of Kentucky
Kasey Buckles, University of Notre Dame
Daniel Hungerman, University of Notre Dame
The Economic Journal, ueaa068, published May 27, 2020