This paper reexamines the first viable and a still leading explanation for mid-twentieth
century baby booms: Richard Easterlin's relative income hypothesis. He suggested that
when incomes are higher than material aspirations (formed in childhood), birth rates would
rise. This paper uses microeconomic data to formulate a measure of an individual's relative
income. The use of microeconomic data allows the researcher to control for both state
fixed effects and cohort fixed effects, both have been absent ...
This paper reexamines the first viable and a still leading explanation for mid-twentieth
century baby booms: Richard Easterlin's relative income hypothesis. He suggested that
when incomes are higher than material aspirations (formed in childhood), birth rates would
rise. This paper uses microeconomic data to formulate a measure of an individual's relative
income. The use of microeconomic data allows the researcher to control for both state
fixed effects and cohort fixed effects, both have been absent in previous examinations of
Easterlin's hypothesis. The results of the empirical analysis are consistent with Easterlin's
assertion that relative income influenced fertility decisions, although the effect operates only
through childhood income. When the estimated effects are contextualized, they explain 12
percent of the U.S. baby boom.
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