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Unemployment and Fertility: A Long Run Relationship

Abstract

The paper examines the relationship between the unemployment rate and the fertility rate in a number of European countries along with Japan and the US. We use fractional integration and cointegration techniques to establish this long run relationship. The analysis shed some light on the degree of persistence of the series, and on whether policy actions are required for highly persistent series. The evidence suggests that these two variables (unemployment and fertility rates) are not related in the long run. However, in the short run, assuming that unemployment rate is weakly exogenous, the coefficient relating the two variables is found to be negative in four countries: the Netherlands, Portugal, Spain and the US.

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Fig. 1
Fig. 2

Notes

  1. 1.

    Note that Eq. (2) can be expressed in terms of a single equation as \(\tilde{y}_{t} = \beta _{0} \tilde{1}_{t} + \beta _{1} \tilde{t}_{t} + u_{t} ;\) where \(\tilde y_{t}= (1 - L)^{{d_{o} }} y_{t} ;\ \tilde 1_{t_{t}}=(1 - L)^{{d_{o} }} 1,\) and \(\tilde{t}_{t} = (1 - L)^{{d_{o} }} t,\) and since ut is I(0) by construction, standard t-tests can be applied for β0 and β1in (2).

  2. 2.

    Note that under this specification we are not testing for cointegration since URt−1 is taken as weakly exogenous in the regression model (4).

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Acknowledgements

Prof. Luis A. Gil-Alana gratefully acknowledges financial support from the MINEIC-AEI-FEDER ECO2017-85503-R Project from ‘Ministerio de Economía, Industria y Competitividad’ (MINEIC), ‘Agencia Estatal de Investigación’ (AEI) Spain and ‘Fondo Europeo de Desarrollo Regional’ (FEDER). An internal Project from the Universidad Francisco de Vitoria is also acknowledged. Comments from the Editor and three anonymous reviewers are gratefully acknowledged.

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Fernandez-Crehuet, J.M., Gil-Alana, L.A. & Barco, C.M. Unemployment and Fertility: A Long Run Relationship. Soc Indic Res 152, 1177–1196 (2020). https://doi.org/10.1007/s11205-020-02468-8

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Keywords

  • Unemployment rate
  • Fertility rate
  • Long memory
  • Fractional integration
  • Fractional cointegration

JEL Classification

  • C22
  • C32
  • J13
  • J64