Economic Uncertainty and Fertility

The precautionary motive for saving predicts that an increase in income uncertainty increases saving by reducing both consumption and fertility. We examine this prediction using a new measure of economic uncertainty—the World Uncertainty Index—and focus on data from 126 countries for the period 1996–2017. The empirical findings indicate that uncertainty decreases the fertility rate, as suggested by theory. This evidence is robust to different model specifications and econometric techniques as well as to the inclusion of various controls. The evidence also indicates that changes in uncertainty may be a factor explaining why fertility is procyclical.