Abstract

Cross-sectional data and long-period time series data have generally shown an inverse relationship between income and fertility. But short-period time series data over the business cycle have shown a direct relationship. The first part of this paper resolves this apparent paradox by showing that it arises from a statistical illusion-specification bias due to omitted lagged variables.

The second part of the paper then considers the likely unconditional effect of income on fertility in several sorts of situations: (a) secular income increase in less developed countries; (b) cyclical income change in industrialized countries; (c) secular income increase in industrialized countries; and (d) incentive payments for higher and lower fertility.