On the estimation of the effect of labour participation on fertility

Abstract

In this paper we consider the estimation of the causal effect of female labour market status (participation and employment) on fertility. We focus on the sensitivity of the estimated effect to (i) the assumptions about the exogeneity of labour market status; and (ii) the time interval between the measurement of fertility and employment status. Using Spanish quarterly data, we estimate a switching probit model that accounts for the joint determination of both variables. In order to obtain a behavioural effect of the former on the latter, we look at the timing of conception instead of the timing of birth, and present alternative sets of estimates depending on the accuracy with which conception is measured (yearly or quarterly). Our results show a positive although non-significant effect of participation and employment on the probability of having the first child, once the sample of women who conceive in the same quarter (or one quarter later) in which labour market status is measured and the endogeneity between both variables is accounted for. We find that annual data tend to over-estimate the negative effect of employment or participation on the probability of having a child, but the main biases appear when looking at the effect of participation.