The Effect of Relative Cohort Size on Fertility: Assessing the Importance of the Easterlin Hypothesis Today

Abstract: Although Easterlin’s hypothesis of relative income has been widely supported by the majority of researchers that have tested it, these researchers have aimed to find a relationship between relative cohort size and fertility in the same time period that Easterlin examined. In this paper I argue that for the Easterlin hypothesis to be supported, it has to hold across nations as well as across time. The effect of relative cohort size on fertility is thus tested during a later time period in this paper, with the starting point derived from where most researchers on the topic have ended their scrutiny. Panel data for five industrialised nations between 1988 and 2008 have been analysed using pooled and fixed effects models. The pooled regressions show a clear negative effect of relative cohort size on fertility levels, and the mixed results from the fixed effects regressions including interactions between country and relative cohort size show both statistically and scientifically insignificant coefficients. The lack of support for the Easterlin hypothesis during this later time period indicates that the relationship between relative cohort size and fertility only was unique for the post-war period when the baby boom generation increasingly entered the labour market and fertility decreased substantially. This study discusses the possibility that a causal relationship has dissolved alternatively that the earlier relationship observed in fact was spurious due to different simultaneous processes.