Is a positive association between female employment and fertility still spurious in developed countries?

BACKGROUND The cross-sectional association between female employment and fertility across developed countries turned from negative to positive during the mid-1980s. The conventional view is that the observed positive association is spurious owing to country-specific heterogeneity. OBJECTIVE We revisit the validity of this view using recent data up to 2017 from 24 countries belonging to the Organisation for Economic Co-operation and Development (OECD). METHODS Based on the data downloaded from the OECD database, we estimate the time-series association between the female labor force participation rate (FLFP) and total fertility rate (TFR) by fixed-effects regression models, which can control for country-specific heterogeneity. RESULTS The more recent the data set used, the more likely it is that the time-series correlation will be positive between FLFP and TFR, even after controlling for country-specific heterogeneity. We also observe that public spending on families, especially in the form of benefits in kind, starts increasing once FLFP becomes sufficiently high. CONCLUSIONS A positive correlation between female employment and fertility in developed countries is no longer attributable to country-specific heterogeneity. The results are supportive of the view that higher female employment can make socioinstitutional contexts more favorable for childbearing, leading to a positive association between FLFP and TFR. CONTRIBUTIONS This study underscored the need for further investigation of the association between female employment and fertility, which is likely to have changed in recent decades. 1 Hitotsubashi University, Tokyo, Japan. Email: oshio@ier.hit-u.ac. jp. Oshio: Positive association between female employment and fertility in developed countries 1278 http://www.demographic-research.org 1. Background From an economic viewpoint, the increasing role of women in the labor market is expected to raise the opportunity cost of childbearing and thereby reduce fertility (Becker 1981). If this is correct, there should be a negative association between female employment and fertility. However, the cross-sectional association across developed countries turned from negative to positive during the mid-1980s (Ahn and Mira 2002; Apps and Rees 2004; Martínez and Iza 2004; Rindfuss, Guzzo, and Morgan 2003). This change has prompted a debate about the relevance of the perceived conflict in women about choosing between work and childcare. Some researchers explain that the change in the association between female employment and fertility is attributable to the reduced incompatibility in women between the role of mother and worker (Rindfuss, Guzzo, and Morgan 2003), thereby increasing the availability of market childcare or childcare support (Ahn and Mira 2002; Apps and Rees 2004; Martínez and Iza 2004), as well as increasing the wages of working women (Ahn and Mira 2002). In sharp contrast to these arguments, Kögel (2004) finds no positive association between female employment and fertility when using time-series data. He argues “the reversal in the sign of the cross-country correlation is most likely due to a combination of two elements: First, the presence of unmeasured country-specific factors and, second, country-heterogeneity in the magnitude of the negative time-series association between fertility and female employment” (Kögel 2004:46). He applies fixed-effects (FE) models to country-level time-series (quinquennial) data from countries belonging to the OECD by splitting the estimation period into two: 1960–1985 and 1985–2000. He shows that the time-series association between female employment and fertility remained negative, although the magnitude and significance level of this association declined after 1985. Kögel’s (2004) observation reminds us that we should be cautious in interpreting any causality that changes the positive association between female employment and fertility observed from cross-country data. Indeed, it has been argued that both female employment and fertility tend to move in the same direction led by the third variable, which includes social norms and socioinstitutional background (Engelhardt, Kögel, and Prskawetz 2004) and that there could even be a long-run causality from fertility to female employment (Mishra and Nielsen 2010). Meanwhile, a comprehensive survey of micro-level studies (Matysiak and Vignoli 2008) stressed a significant change in the association between female employment and fertility over time. In the same vein, and even more generally, Myrskylä, Kohler, and Billari (2009) observed that in developed countries with a high Human Development Index (HDI), the HDI-fertility correlation is reversed with a higher HDI level. Their finding suggests that Demographic Research: Volume 41, Article 45 http://www.demographic-research.org 1279 the association between female employment and fertility would also turn from negative to positive once the level of female employment becomes sufficiently high, inspiring debate on their association, including some critical views on this turnaround (Furuoka 2009; Harttgen and Vollmer 2014). The present study investigates whether a time-series association between the FLFP and TFR is positive even after controlling for country-specific fixed effects if the statistical analysis is based on more recent data than that used by Kögel (2004), who used data up to the year 2000. It is plausible to predict that the factors that are assumed to be fixed for each country in the FE models should not stay fixed over time in reality. We cannot rule out the possibility that a positive association between female employment and fertility in developed countries is no longer spurious.