The asymmetric housing wealth effect on childbirth

Shinichiro Iwata, Michio Naoi

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

The literature has shown that an increase in housing wealth, driven by unexpected shocks to house prices, exerts a positive effect on the birthrates of homeowners. According to canonical models, a decrease in housing wealth has a symmetric negative impact on the fertility behavior of households. That is, housing gains and losses of the same size have identical quantitative effects on fertility. In comparison, the reference-dependent preferences in prospect theory suggest that people care more about housing losses than equivalent gains, leading to an asymmetric effect of housing wealth on the fertility decision. We propose a theoretical model where household utility depends on both childbirth and housing wealth. In this model, the utility from housing wealth is reference dependent in the sense that we assume the housing value in the previous year is the reference. The theoretical model suggests that a decrease in housing wealth would have a larger impact on the probability of childbirth than an equivalent increase. We test this theoretical prediction using longitudinal data on Japanese households. Consistent with the theoretical prediction, our empirical results show that the fertility responses of homeowners are substantially larger for housing losses than equivalent gains.

Original languageEnglish
Pages (from-to)1-25
Number of pages25
JournalReview of Economics of the Household
DOIs
Publication statusAccepted/In press - 2017 Jan 3

Fingerprint

housing
fertility
homeowner
Childbirth
Wealth effect
Housing wealth
Fertility
Household
Prediction
Values

Keywords

  • Childbirth
  • Homeownership
  • Housing prices
  • Loss aversion
  • Reference-dependent preferences
  • Wealth

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

Cite this

The asymmetric housing wealth effect on childbirth. / Iwata, Shinichiro; Naoi, Michio.

In: Review of Economics of the Household, 03.01.2017, p. 1-25.

Research output: Contribution to journalArticle

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