Do Family Wealth Shocks Affect Fertility Choices? Evidence from the Housing Market Boom and Bust

Kevin J. Mumford, Purdue University
Michael Lovenheim, Cornell University

This paper investigates how wealth affects fertility. In particular, we use the recent housing boom and bust to generate exogenous variation in household wealth. We first conduct a state-level aggregate analysis to investigate how fertility is related to housing price movement using state differences in the timing and size of the housing market boom and bust. We then conduct an analysis using restricted-use data from the Panel Study of Income Dynamics that allows us to track how fertility behavior is related to individual-level housing price growth. We find that for homeowners, a $10,000 increase in real housing wealth causes a 0.07% increase in fertility. We find little effect on the fertility of renters, which supports our identification strategy. Our estimates suggest that the large recent variation in the housing market could have sizable demographic effects driven by the positive effect of housing wealth on fertility.