Document Type

Journal Article

Publication Details

Lindo, J. M. (2010). Are children really inferior goods? Evidence from displacement-driven income shocks. Journal of Human Resources: education, manpower and welfare economics, 45 (2), 301-327.


This paper explores the causal link between income and fertility by analyzing women's fertility response to the large and permanent income shock generated by a husband's job displacement. I find that the shock reduces total fertility, suggesting that the causal effect of income on fertility is positive. A model that incorporates the time cost of children and assortative matching of spouses can simultaneously explain this result and the negative cross-sectional relationship. I also find that a husband's displacement accelerates childbearing, which is consistent with lifecycle models of fertility in which the incentive to delay is driven by expected earnings growth.