Economic determinants of OECD fertility rates : Evidence of the Easterlin hypothesis

Abstract: The Easterlin hypothesis of relative cohort sizes has previously been used to explain changes in the fertility rate in the mid-20th century. The hypothesis states that a small relative size of the young cohort to the old cohort increases the fertility rate, and a large relative size of the young cohort to the old cohort decreases the fertility rate. Whether the Easterlin hypothesis can explain recent fertility changes remains debated. This thesis applies the Easterlin hypothesis to 22 high-income OECD countries, using data from 1980 to 2020. In addition to previously used explanatory variables, this thesis adds to the literature by controlling for social expenditure on families in benefit and cash transfers and the median gender wage gap. The results of this thesis indicate that the effect of relative cohort sizes on the total fertility rate is lower than what has previously been found, and this effect is insignificant under country-clustered errors. Moreover, the Easterlin hypothesis fails at explaining the total fertility rate in the period from 2000 to 2020. Instead, the result in the later period showed that female labour force participation, GDP per capita and social expenditure per capita is of increased importance. No statistical effect of including the median gender wage gap is found.