Ruhr Economic Papers

Ruhr Economic Papers #677

Bismarck in the Bedroom? Pension Reform and Fertility: Evidence 1870-2010

by Phillip J├Ąger

RWI, 02/2017, 28 S./p., 8 Euro, ISBN 978-3-86788-785-4 DOI: 10.4419/86788785

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Abstract

Rising public pension generosity has frequently been cited as one reason for the (persistently) declining fertility rates in many advanced economies. Despite the theoretical appeal, empirical evidence on the pension-fertility nexus is limited. To fill this gap, I study country-level fertility trends before and after 23 pension reforms using a long-run panel dataset starting in 1870. In addition to the raw fertility rate (birth per women aged 15-49), I examine the residuals of a fertility regression, which capture variations in the fertility rate that cannot be explained by alternative theories of the historical fertility decline. Contrasting pre- and post-reform trends of the raw fertility rate as well as the fertility regression residual across countries, I do not find robust evidence that pension reforms, on average, affect fertility in the way most theoretical models predict. On the individual country level, however, some reforms are indeed associated with a significant structural break in fertility trends that is in line with the old-age security hypothesis. Varying social ties might provide an explanation for the different country-specific fertility reactions to pension reforms.

JEL-Classification: H55, J13

Keywords: Old-age security; fertility; pension reform

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