Fertility, Female Labor Force Participation, and the Demographic Dividend
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1 Fertility, Female Labor Force Participation, and the Demographic Dividend David E. Bloom David Canning Günther Fink Jocelyn E. Finlay Program on the Global Demography of Aging Harvard School of Public Health Second Annual Research Conference on Population, Reproductive Health, and Economic Development, December This research was made possible by Grant Number 5 P30 AG from the National Institute on Aging, National Institutes of Health and by a grant from the William and Flora Hewlett Foundation.
2 Main Questions in this Paper 1. How do fertility changes during the demographic transition affect female labor force participation? 2. What are the long run implications for the size of the demographic dividend? Identification We identify the effect of fertility using abortion laws as instrument Result Fertility declines lead to a significant increase in female labor force participation augmenting the demographic dividend Fertility, Female Labor Force Participation, and the Demographic Dividend 2
3 Outline Introduction and Literature Data Empirical Results Simulations Conclusion Fertility, Female Labor Force Participation, and the Demographic Dividend 3
4 Introduction and Literature Continued Female Participation Response to Fertility US state-level studies show that a fall in fertility leads to an increase in the extent of female labor force participation: Bailey (2006), Cain and Dooley (1976). Identification Approaches Accessibility of the contraceptive pill: Bailey, 2006 State level legalization of abortion: Fertility effect: Levine et al. (1999); Klerman (1999) Education and Participation: Angrist and Evans (1996) Fertility, Female Labor Force Participation, and the Demographic Dividend 4
5 Identification Fertility Female Labor Force Participation Abortion Legislation Fertility, Female Labor Force Participation, and the Demographic Dividend 5
6 Data Female Labor Market Participation (ILO 2007) By cohort (15-19, 20-25,,60-64) countries Fertility (WDI 2006) Total fertility rate Abortion Index (United Nations Population Division 2002) Combined score of legal abortion on grounds of physical and mental health of the mother, life-threatening pregnancies, rape, fetal impairment, economic hardship, on request Items highly correlated; index very similar to principal component Fertility, Female Labor Force Participation, and the Demographic Dividend 6
7 Female Labor Force Participation 1960 and Percentage Participating Fertility, Female Labor Force Participation, and the Demographic Dividend 7 Age Group
8 Empirical Specification P = α + β Fert + γ Cap + ϕ Life + λ Urban ijt i i jt i jt i jt i jt + φ Eduf + φ Edum + δ + δ + τ t + ε f m i jt i jt it ij ij ijt P ijt Fert jt Cap jt female labor force participation of age group i, country j, year t total fertility rate capital stock per working age person Urban jt population living in urban area (%) Eduf jt average years of schooling for females >15 Edum jt average years of schooling for males >15 Fertility, Female Labor Force Participation, and the Demographic Dividend 8
9 Female Labor Force Participation (30-34) 2SLS 2SLS, trend 2SLS, trend, lag Total Fertility Rate *** ** * (5.359) (3.866) (3.975) 0.497*** (0.083) Female life expectancy (0.275) (0.142) (0.110) Capital to Working age population 0.706*** 0.368** (0.114) (0.153) (0.141) Urban population (% of total) *** ** (0.159) (0.168) (0.202) Average schooling years, male >15yrs (1.587) (1.193) (1.043) Average schooling years, female >15yrs ** (3.162) (1.735) (1.483) Observations R-squared Fertility, Female Labor Force Participation, and the Demographic Dividend 9
10 First Stage Results 2SLS 2SLS, trend 2SLS, trend, lag Abortion Index *** *** ** (0.017) (0.016) (0.015) *** (0.004) Female life expectancy *** 0.029*** 0.021*** (0.009) (0.007) (0.007) Capital to Working age population 0.022*** 0.035*** 0.032*** (0.002) (0.004) (0.004) Urban population (% of total) *** *** *** (0.006) (0.007) (0.008) Average schooling years, male >15yrs 0.231*** 0.262*** 0.230*** (0.059) (0.053) (0.050) Average schooling years, female >15yrs *** *** *** (0.059) (0.058) (0.057) Observations R-squared Cragg-Donald F-stat Fertility, Female Labor Force Participation, and the Demographic Dividend 10
11 Total Dynamic Effect of Fertility Decline Participation Effect Direct Effect Total effect Age Group Fertility, Female Labor Force Participation, and the Demographic Dividend 11
12 Simulation Framework I Production Function Y = AH K α 1 t t t t Physical Capital Stock K = sy + (1 δ ) K t t 1 t 1 Parameterization 2 α =, s = 0.24, δ = A = 0 t Fertility, Female Labor Force Participation, and the Demographic Dividend 12
13 Simulation Framework II Demographic Structure 45 s s ( s ) s f it = i 1, t 1 1 σi 1 1, 0t = λ s it it i= 16 P P fori P f P Labor Force L 100 s s t = Pitρ it i= 0 s= m, f Fertility, Female Labor Force Participation, and the Demographic Dividend 13
14 Specific Example: South Korea Fertility (TFR) Life Expectancy at birth Female Labor Market Participation (25-29) Fertility, Female Labor Force Participation, and the Demographic Dividend 14
15 Results GDP Index Baseline Solow Age Structure Age Structure + Female Participation 0 Fertility, Female Labor Force Participation, and the Demographic Dividend
16 Conclusions Empirical results suggest that the decline in fertility leads to a significant increase in female labor force participation This increase in female labor force participation compounds the positive growth effects induced by fertility decline The magnitude of aging effect depends on the participation behavior of the 65+ age group the focus of our complementary study Fertility, Female Labor Force Participation, and the Demographic Dividend 16
17 Backup Slides Fertility, Female Labor Force Participation, and the Demographic Dividend 17
18 Case Study: South Korea Participation Rates Total Fertility Rate Female Labor Market Participation Ages Group Female Labor Market Participation Ages Total Fertility Rate Since 1953: Abortion prohibited on any ground. January 1973: Liberalization of abortion Fertility, Female Labor Force Participation, and the Demographic Dividend
19 Korea: Demographics and Workers per Capita Age 65+ per working age Age 0-14 per working Age Working Age Persons per Capita Workers per Capita (right hand scale) Fertility, Female Labor Force Participation, and the Demographic Dividend
20 Population Forecast: Low Fertility Scenario Population, Millions Actual Population Simulated Population Fertility, Female Labor Force Participation, and the Demographic Dividend
21 Actual versus Simulated Age Structure Population Share 25% 20% 15% Actual Age Structure 1960 Simulated Age Structure % 5% 0% Fertility, Female Labor Force Participation, Age Groupand the Demographic Dividend 21
NBER WORKING PAPER SERIES FERTILITY, FEMALE LABOR FORCE PARTICIPATION, AND THE DEMOGRAPHIC DIVIDEND
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