The Economics of Fertility Timing: An Euler Equation Approach

We develop a dynamic model of fertility, female labour supply and consumption to explain birth timing, particularly why more educated women delay fertility. We express the birth timing decision in an Euler equation framework by treating the probability of fertility in each period as a continuous choice variable, with actual fertility a random outcome given this probability. Within this framework, it is easy to see the effects of economic forces on fertility timing decisions. Using US data we show that women with higher levels of education delay fertility because they can accrue greater benefits from work experience.