A strict policy on fertility effects every
aspect of economic life
The 20th century witnessed the birth of modern
family planning and its effects on the fertility of hundreds of millions of
couples around the world. In 1979, China formally initiated one of the
world’s strictest family planning programs—the “one child policy.” Despite
its obvious significance, the policy has been significantly understudied.
Data limitations and a lack of detailed documentation have hindered
researchers. However, it appears clear that the policy has affected China’s
economy and society in ways that extend well beyond its fertility rate.
Relative costs and family characteristics
determine the effectiveness of different forms of childcare
Increasing population age and low fertility
rates, which characterize most modern societies, compromise the balance
between people who can participate in the labor market and people who need
care. This is a demographic and social issue that is likely to grow in
importance for future generations. It is therefore crucial to understand
what factors can positively influence fertility decisions. Policies related
to the availability and costs of different kinds of childcare (e.g. formal
care, grandparents, childminders) should be considered and promoted after an
evaluation of their effects on the probability of women having children.
Households can benefit from international trade
as it lowers the prices of consumer goods
Imported products tend to have lower prices than
locally produced ones for a variety of reasons, including lower labor costs
and better technology in the exporting country. The reduced prices may lead
to wage losses for individuals who work in the production of a local version
of the imported item. On the other hand, lower prices may be beneficial to
households if the cheaper product is in their consumption basket. These
welfare gains through consumption, on average, are found to be larger in
magnitude than the wage effect for some developing countries.
Hot weather can worsen reproductive health and decrease later
Research finds that hot weather causes a fall in birth rates
nine months later. Evidence suggests that this decline in births is due to hot weather harming
reproductive health around the time of conception. Birth rates only partially rebound after
the initial decline. Moreover, the rebound shifts births toward summer months, harming infant
health by increasing third trimester exposure to hot weather. Worse infant health raises
health care costs in the short term as well as reducing labor productivity in the longer term,
possibly due to lasting physiological harm from the early life injury.
A range of other policies and changes are needed
for childcare expansion to increase mothers’ labor supply
In 2002, the EU set targets for expanding
childcare coverage, but most of the post-socialist countries are behind
schedule. While childcare expansion places a heavy financial burden on
governments, low participation in the labor force by mothers, especially
those with children under the age of three, implies a high potential impact.
However, the effectiveness of childcare expansion may be limited by some
common characteristics of these countries: family policies that do not
support women’s labor market re-entry, few flexible work opportunities, and
cultural norms about family and gender roles shaped by the institutional and
economic legacy of socialism.
The success of universal preschool education depends crucially
on the policy parameters and specific country context
Since the 1970s, many countries have established free or highly
subsidized education for all preschool children in the hope of improving children’s learning
and socio-economic life chances and encouraging mothers to join the labor force. Evaluations
reveal that these policies can increase maternal employment in the short term and may continue
to do so even after the child is no longer in preschool by enabling mothers to gain more job
skills and increase their attachment to the labor force. However, their effectiveness depends
on the policy design, the country context, and the characteristics of mothers of
Parental leave increases the family–work balance, but may
have negative impacts on mothers’ careers
Numerous studies have investigated whether the provision
and generosity of parental leave affects the employment and career prospects of women.
Parental leave systems typically provide either short unpaid leave mandated by the firm,
as in the US, or more generous and universal leave mandated by the government, as in
Canada and several European countries. Key economic policy questions include whether, at
the macro level, female employment rates have increased due to parental leave policies;
and, at the micro level, whether the probability of returning to work and career
prospects have increased for mothers after childbirth.
The availability of common law marriage may
affect couple formation, labor supply, and the decision to have children
In addition to regular marriage, Australia,
Brazil, and 11 US states recognize common law (or de facto) marriage, which
allows one or both cohabiting partners to claim, under certain conditions,
that an informal union is a marriage. France and some other countries also
have several types of marriage and civil union contracts. The policy issue
is whether to abolish common law marriage, as it appears to discourage
couple formation and female labor supply. A single conceptual framework can
explain how outcomes are affected by the choice between regular and common
law marriage, and between various marriage and civil union contracts.
Recent declines in youth employment, net worth,
and family formation could permanently affect financial well-being
Current cohorts of young adults entered
adulthood during an international labor and housing market crisis of a
severity not experienced since the Great Depression. Concerns have arisen
over the impacts on young adults’ employment, income, wealth, and living
arrangements, and about whether these young adults constitute a “scarred
generation” that will suffer permanent contractions in financial well-being.
If true, knowing the mechanisms through which young adults’ finances have
been affected has important implications for policy measures that could
improve the financial well-being of today’s young adults in the present and
Subsidized childcare fosters maternal
employment, but employment status, childcare quality, and availability
Women’s labor force participation has rapidly
increased in most countries, but mothers still struggle to achieve a
satisfactory work−life balance. Childcare allows the primary caregiver,
usually the mother, to take time away from childrearing for employment.
Family policies that subsidize childcare and increase its availability have
different effects on female labor supply across countries. For policymakers
to determine how well these policies work, they should consider that policy
effectiveness may depend on country-specific pre-reform female employment
and earnings, and childcare availability, costs, and quality.