Negotiating Parenthood: An Account of the Changing Relationship between Women's Work and Fertility

Title: 

Negotiating Parenthood: An Account of the Changing Relationship between Women's Work and Fertility

Abstract: 

In high-income economies, the cross-country relationship between women's labor force participation and fertility has reversed in recent decades: countries where many women work used to have fewer children, but now they have more. In this paper, we examine the role of bargaining frictions in the household in accounting for this reversal. We develop a model in which partners bargain over how many children to have under limited commitment. Frictions arise because having children changes outside options. Bargaining frictions are large, and fertility is low, if mothers provide the majority of childcare while giving up lucrative career opportunities to raise children. In a simple setting, the bargaining friction is proportional to the marginal child penalty. When the only alternative for women is to raise children or to work, the relationship between women's labor supply and fertility is negative. When women's labor market opportunities are sufficiently attractive that market childcare is used, the relationship reverses. The model can account for the broad patterns in women's labor supply, child penalties, and fertility observed in high-income countries in recent decades.