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arXiv · 2503.02237

Fertility Choices with Career Risk

Ruiwu Liu
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Abstract

Couples decide whether to have children before knowing the persistent career loss generated by parenthood. After the loss is realized, household resources are renegotiated and individual market earnings partly determine outside options. This limited-commitment friction places a disproportionate share of female earnings risk on the wife even when expected household resources are unchanged. We embed this mechanism in a generalized-Nash fertility bargain. The model has a unique positive agreement whenever both spouses have positive marginal gains at zero fertility. A larger expected child penalty and greater career-loss risk reduce agreed fertility. A higher loading of own earnings into outside options reduces fertility precisely when the wife's participation margin dominates the husband's corresponding gain. Insurance against the unexpected component of the career loss raises fertility without subsidizing its mean, whereas a conventional per-child transfer operates only through expected cost. A full-commitment benchmark isolates the risk-sharing distortion. In an illustrative discrete-parity exercise, rising career risk lowers desired family size from three children to two and then one, while partial earnings-loss insurance can restore the three-child outcome. These results identify a policy margin that is not available in a deterministic participation-constraint model: insurance against the distribution of the child penalty.

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Ruiwu Liu. 2025-03-04. Fertility Choices with Career Risk. https://arxiv.org/abs/2503.02237

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