Ruhr Economic Papers

Ruhr Economic Papers #718

Rainfall Risk, Fertility and Development: Evidence from Farm Settlements During the American Demographic Transition

by Michael Grimm

RWI, 11/2017, 50 S./p., 8 Euro, ISBN 978-3-86788-838-7 DOI: 10.4419/86788838

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Abstract

I analyze whether variation in rainfall risk played a role for the speed of the demographic transition among American settlers. The underlying hypothesis is that children constituted a buffer stock of labor that could be mobilized in response to income shocks. Identification relies on fertility differences between farm and non-farm households within counties and over time. The results suggest that in areas with a high variance in rainfall the fertility differential between farm households and non-farm households was significantly higher than in areas with a low variance in rainfall. This channel is robust to other relevant forces such as income, education and children’s survival as well as the spatial correlation in fertility levels. The analysis also shows that this effect was reduced and finally disappeared as irrigation systems and agricultural machinery emerged. Hence, access to risk-mitigating devices significantly contributed to the demographic transition in the US. These findings also have potentially important implications for Sub-Saharan Africa, especially for those areas where income risks are a major threat to households and where fertility is still high and only slowly declining or not declining at all.

JEL-Classification: J13, N31, N32, O12

Keywords: Demographic transition; fertility; rainfall risk; insurance

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