Inverse J effect of economic growth on fertility: a model of gender wages and maternal time substitution

This paper presents a model where economic growth, via growth in female wages
relative to male wages, encourages households to raise paid female labor supply and
have more children by substituting child care for maternal time. A threshold logarithm per
capita output, above which fertility decline reverses, depends on subsidized child care,
maternity pay, and the value placed on children and maternal time spent rearing
children. The predictions explain recent evidence and identify cross country differences
in gender wages, family policy and willingness to substitute maternal time in child rearing
as important factors in an inverse J-shaped effect of economic growth on fertility. The
analysis is robust to the introduction of education and cost sharing among children in
child rearing. Economies of scale in child rearing reduces the threshold logarithm of per
capita output. Demand for child quality continues to rise with wages despite fertility
decline reversal.