Wolfgang Lutz and the Low Fertility Trap

Back in July I published a post about Austrian demographer Wolfgang Lutz’s hypothesis that those countries which sustain total fertility rates below 1.5 for any length of time may have fallen into a self-reinforcing low-fertility trap. Old Rottenhat (Ray to his friends) argued in comments that I had explained the reasons for the existence of low fertility but that I had not justified the idea that this was a ‘trap’. Old Rottenhat was right, and taking advantage of the fact that Lutz himself has now given a fuller outline of the hypothesis at the recent Postponement of Childbearing in Europe Conference (see presentation) I will now try and remedy this lacuna.

So here finally Ray, is your reply: I hope it is something which indeed goes beyond the obvious.

Taking as his starting point the proposition that since the ending of the Malthusian regime with the arrival of the industrial revolution no homeostatic demographic equilibrium has subsequently been achieved, the demographer Wolfgang Lutz has continued to dig away at the fertility issue to the point that he now feels compelled to ask the question as to whether or not those societies now experiencing lowest-low fertility (below TFR 1.5) may not in fact be caught in some kind of low fertility trap.

Lutz defines the basic Idea lying behind his hypothesis as being the following: once fertility falls below a certain level and stays there for sufficient time this can produce a self-reinforcing demographic regime change that is difficult or impossible to reverse. This ‘low fertility trap’ hypothesis is really based based on the operation of three interacting mechanisms:

1/. A population momentum component. The delay in childbirth produces very low fertility rates which last for decades, during this time there is pyramid-base shrinkage, and new generations arrive composed of much smaller cohorts. This systematically produces less and less children.

2/ An ideas propagation mechanism. This works via the idea of ‘ideal family size’: young people are increasingly socialized in an environment with few children, and this may result in a lower ‘ideal family size’ in the subsequent generation, and so on. Recent (2001) Eurobarometer readings from Germany and Austria indicate that young people may now, on average, have a below replacement ideal of family size (slide on page 8). Since preferences and expectations are important here, this can only lead fertility downwards.

3/ A negative economic feedback process due to cohort and other effects (the Easterlin thesis). Lutz, Skirbekk and Testa develop a flow chart model (page 7 of the presentation in the Adobe Acrobat) which attempts to describe this process.

Lutz’s idea has its origins in:

(a) the observation that countries which have fallen below fertility his critical level of 1.5 TFR have generally not subsequently ‘recovered’ in the sense of returning to a level above 1.5. In particular the germ of the idea here comes from the work of the Australian demographer Peter MacDonald (see this paper) who was the first to note that 1.5 TFR seems to mark something of a watershed.

(b) an awareness that whilst most projections and policy were being set by the assumption that there was a likely ‘homeostatic’ return to near replacement fertility, there is no rigourous theoretical justification for this assumption.

As Lutz et al observe:

“Virtually all population projections for low fertility countries assume end of fertility decline at current cohort level (Eurostat) or increase (UN), while at the same time continued increases of life expectancy are assumed. To be honest: we have no good theory with predictive power. Some “soft” arguments: end of postponement, children make happy, governments will eventually do “something”. But at the same time the basic forces that brought down fertility continue to work, possibly even stronger (value change, globalization,youth unemployment)”.

(c) the further observation that government policy has non-linear consequences in this area. This view differs, for example, from that of the Canadian sociologist Anne Gauthier who argues straight and simple that: Public policies have an undeniable effect on families. On the other hand it is close to the work of social network theorists who examine propagation mechansisms for ideas and values across societies. In the words of Ronald Rindfuss and his co-workers:

“Changes in attitudes likely create a feedback mechanism, influencing behavior; and changes in behavior likely create a feedback mechanism influencing attitudes.” (Rindfuss et al. 2004, p. 855)

In the terms of Lutz et al: once the number of children (siblings, friends, children seen in other families, media) experienced during the process of socialization falls below a certain level, their own ideal family size may become lower which in course may result in further declining actual family size and still lower ideals in the subsequent generation.

The idea of negative demographic momentum is closely associated with the other key contribution Lutz has made to our understanding of the “second demographic transition”: his idea of a ‘birth deficit’. This deficit arises due to the the continuing presence of a fertility tempo effect, wherby the increase in the mean age of childbearing results in a lasting loss of births, and these ‘missing’ births cause structural damage to the age pyramid.

In the main Lutz bases his economic feedback mechanism on the cohort impact theory of Richard Easterlin and his associated ‘relative income hypothesis. According to Easterlin changing cohort size produces either a crowding-out (the baby boom) or a crowding-in (declining fertility) phenomenon. The hypothesis posits that, other things being constant, the economic and social fortunes of a cohort (those born in a given year) tend to vary inversely with the relative size of that cohort, which is itself approximated by the crude birth rate in the period surrounding the cohort’s birth. The cohort mechanisms operate mainly through three main social institutions – the family, school and labour market. Diane Macunovich has a good summary of Easterlins ideas and their application to fertility changes in Relative Cohort Size, Source of A Unifying Theory of the Global Fertility Transition.

The operation of this general ‘crowding mechanism’ means that large birth cohorts face adverse economic and social conditions, higher unemployment, and lower than expected wages, outcomes which are significantly at odds with their material aspirations. As a result, they postpone family formation and have fewer children. This type of cohort analysis is now being applied to the ‘greying’ phenomenon in the United States as the large ‘boom generation’ steadily approaches retirement age. On the other hand, the crowding-in syndrome would mean that the reduced cohorts which follow the fertility decline should find work more easy to obtain, and salaries relatively higher. This should lead to rising income expectations, which may be more difficult to sustain as the fiscal burden weighs down on younger generations with the consequence that they continually postpone starting families.

This latter eventuality seems to have relatively little empirical evidence to date to back it up (except, perhaps, very recently in Japan) so should really be treated with some caution.

Macunovich takes the theory and tries to use it to develop a general theory of the whole demographic transition from cohort effects, and I feel that at this level the argument is not convincing. The cohort dimension is however very evident in the US baby-boom phenomenon, and the subsequent fertility reaction, and indeed this is having the consequence that population ageing is being seen very much as a cohort phenomenon in the United States, but this experience is hard to generalise.

Lutz et al do, however, offer another suggestive direction for analysis: low fertiliy leads to the acceleration of societal ageing, this produces cuts in welfare and pension benefits, generates a general pessimism about the future and lowers expectations about future income. The general pessimism, coupled with anticipations of increased life expectancy, can produce increased saving for the future, and this of course can produce a drag on current consumption. The drag on consumption produces a lethargic level of economic growth, and this induces young people to delay having children in order to attempt to maintain current income. This economic chain reaction, especially in the light of what is actually happening in Geramny and Japan, does seem to be one of the possible mechanisms through which the trap – should it in fact exist – might operate.

However, at the end of the day, as Wolfgang Lutz himself emphasises, what we need is more evidence. Perhaps we will find some in the next Eurobarometer survey on family intentions (due June 2006).

References

Rindfuss, Ronald R, Minja Kim Choe, Larry L. Bumpass, and Noriko O. Tsuya, 2004, Social Networks and Family Change in Japan , American Sociological Review 69 (December 2004): 838-861. Washington, DC: American Sociological Association.

42 thoughts on “Wolfgang Lutz and the Low Fertility Trap

  1. “seeing that I am condemned to just writing tripe on my own blog for the moment”

    Come come Guy, that’s not we readers think.

    “I was wondering if you could do something”

    I think you just did, at least for those who read comments. I would say the interesting columns are the solde naturel and the solde migratoire ones.

    There you can see that German population is now falling, Italy would be falling but for immigration, Spain is economically booming thanks to tons of immigration, and Ireland too. The enlargement countries are in fact – in net – the ‘shrinking counries’, since their total population is falling.

    The countries with strong natural growth are Ireland: which was late completing the transition, the Netherlands and France.

    The Netherlands is interesting since the birth postponement phenomenon came to a halt in the late 90s (although they never fell below 1.5), and the UK is interesting since the population growth is now almost entirely due to immigration.

    As I have been flagging, the different relative performances between the Franch and Germany have their origins in what you can see in this table.

  2. It is too bad the immigration figures cannot be broken down in separate categories, like returning expats, EU versus non-EU, etc.

    I know last year there was some commotion about Dutch people leaving the Netherlands (net outflow) and I also know many EU citizens are increasingly finding new homes outside their countries. Many Brits living in Brittany, for instance. And Spain’s booming economy can be explained, at least in part, to the immigration of EU citizens and construction work (notably the urbanizaciones I wrote about on my blog). Spain attracts mainly elderly people, at least that is my impression, but I do not know if there are enough of them to have an impact on Spain’s age and fertility structure.

    I am glad you find the tables useful and I am glad you are writing about this when I cannot.

  3. What are the ods of my opening Fistful of Euros today, for the first time in weeks?

    I think my problem with Lutz’s argument boils down to the feeling that he is deliberately confusing two different definitions of ‘population fertility’.

    The first definition is concerned with the number of children being born per head of population. This is the problem exarcerbated by “1/. A population momentum component”. Fewer children in this generation means fewer people of child-bearing age in the next generation, means fewer children then too.

    The second definition of fertility is concerned with TFR – how many children will a woman of childbearing age have? The “ideas propogation” thing comes into play here – the fewer large families you see, the less likely you are to have a small family.

    One problem is, if the ideational factors change, the TFR will change, regardless of the size of the cohort. They really are different things.

    The related problem is that nothing in that post explains why a TFR of 1.5 is a watershed. Suppose we have two generations of adults, cohort X and cohort Y. Suppose that cohort X had a TFR of 1.6, we all agree that it would be possible for cohort Y to have a TFR of 1.8. If cohort X has a TFR of 1.4, is it so much more difficult for cohort Y to have a TFR of 1.6?

    The ideational and economic pressures are going to be the same in each case. Why is it harder to rise above the figure of 1.5 than to rise above the figure of 1.7? (I suspect the answer is supposed to be “because then the population is smaller”)

  4. “Eurobarometer readings from Germany and Austria indicate that young people may now, on average, have a below replacement ideal of family size”

    How much is that due to fewer young people having an unrealisticly large family ideal while the same number of young people have the same unrealistic small family ideal because i know quite a few who said in highschool that they would never have kids and now have them

  5. “How is TFR actually calculated?”

    This is an interesting question, and since it is the interpretation of TFR which gives rise to all the difficulties.

    Try this:

    “The total fertility rate (TFR) is the sum of the age-specific birth rates of women in five-year age groups multiplied by five in this example. (Single year or ten-year cohorts or other age groupings can be used. National TFR’s are published using five-year Intervals and, therefore, are also used for comparability.) The TFR estimates the number of children a cohort of 1,000 women would bear if they all went through their childbearing years exposed to the age-specific birth rates in effect for a particular time.”

    This extract comes from this easy to read internet posting on TFRs. The highly technical explanation from the masters (John Bongaarts and Griffith Feeney) can be found here, and here.

    Basically the TFR gives a still snapshot of a moving target. Those later cohorts who have low fertility when younger may recover later, but this doesn’t show up in the TFR.

  6. Well Ray, nice of you to show for the party. I never imagined you would be easy to convince :).

    “he is deliberately confusing two different definitions of ‘population fertility’.”

    Well I’m not sure he is doing it deliberately, but if you think the two definitions are confused in the explanation, then almost by definition they must be.

    I think both these definitions (just like rate of GDP growth and growth in income per capita in economics)are valid depending on what you want to use them for.

    Population momentum is a crude measure, but informative within limits. This is revealed in the INSEE page that guy links to: the population is falling in Germany and (ex immigration) in Italy. This is real, not a mere statistical construct, and has consequences.

    One of the consequences is that the generations get smaller, and with a constant fertility rate smaller and smaller.

    The TFR, otoh, *is* a statistical artifact, and is only really useful as a measure of what is going on – like measurements of seismic movements on a Richter scale – they are not the movements themselves but a reflection of them.

    The most accurate measure of fertility is the completed data for each individual woman when the childbearing life is over, but since we need to wait twenty years and more for this, and we need to take social policy decisions now, TFRs are convenient.

    “The related problem is that nothing in that post explains why a TFR of 1.5 is a watershed.”

    No, you are right, nothing does. This is why it is only a hypothesis. Later we will know whether it was right or wrong since we will get to see what actually happens. But if it is right it is important, since we should be doing something to stop others – the developing countries – falling into the same hole. This is much more than an academic debate. This is why science is fascinating, because in real science nothing is obvious, you have to take ‘risky decisions’ (Popper). Once something becomes obvious it is hard to get worked up about it: gee the earth is going round the sun today mum.

    “Suppose we have two generations of adults, cohort X and cohort Y. Suppose that cohort X had a TFR of 1.6, we all agree that it would be possible for cohort Y to have a TFR of 1.8. If cohort X has a TFR of 1.4, is it so much more difficult for cohort Y to have a TFR of 1.6?”

    The whole point is whether or not positive and negative feedback are involved (or in economic terms increasing returns). Lutz works at a centre of systems theory. This is the way systems theorists tend to work. If negative feedback is involved the process is non linear, there will be a ‘tipping point’.

    If you drive across France you come to a line marked La Partage des Eaux, water flows on one side towards the Med and on the other to the Atlantic. This line doesn’t *need* to be there, but it is.

    So if there is a tipping point then it must have a value, then you look at the data and see if you can see anything. This is what Lutz did (although it was Macdonald who frist noticed the phenomenon), and 1.5 looks like it might be a break point. It could have been 1.4 or 1.6. The theory doesn’t decide this, the data does.

    What Lutz provides is a simple working model to show how each of these factors – momentum, ideal family size, cohort or fiscal economic impacts – may interact and make it difficult for young people to have more children, or governments to have policies to support women who want to have children.

    Of course if negative feedback isn’t at work this whole approach is wrong. I am sympathetic to Lutz precisely because I think this whole thing is more ridded with non-linearities than a piece of Emmenthal cheese :).

  7. “How much is that due to fewer young people having an unrealisticly large family ideal while the same number of young people have the same unrealistic small family ideal because i know quite a few who said in highschool that they would never have kids and now have them”

    Again Charly you are right that this kind of survey is not without problems, although they do question women across a spread of ages, and then make yet another statistical artefact. The point again is that without something like this you have no idea what is going on at all. Obviously adolescent aspirations are the least realsitic.

  8. If i read it correctly they only have two data points per country. To connect the dots in such a case always rubs me the wrong way. But what is more interesting is how it compares with how the same people taught 15 year ago. I would expect to see a much lower number than the number the 35-49 now have. Atleast for the EU grounder countries

  9. Frankly, I don’t think the 1.5 figure even qualifies as a hypothesis yet. A hypothesis is when you say “you can’t return from a TFR below 1.5 because….”, and the ‘because’ is missing. Yes, there are negative feedbacks, but they apply just as much when you are moving below 1.6 as when you are moving below 1.5. Lutz has not advanced a reason why the factors that push TFR down become irresistible at that point.

    So you can still colour me unconvinced…

  10. Lutz is probably correct in his conclusion but his reasoning is weak. The real self-reinforcing cycle bringing about low birth rate is this:

    1. The existence of PAYG pension system makes people believe they need no children as a “pension insurance”.

    2. Birth rate is falling, number of retirees is growing.

    3. Tax burden on labor is growing. As a result, labor is being replaced by capital.

    4. Youth unemployment is high, causing people bear less children.

    5. Go back to point #2.

    In other words, the European welfare state is DOOOOMED.

  11. Yeah, yeah, yeah, but we’re going to outlast the debt-ridden US just to be mean.
    Anyway, my point is that all of these things are true when the TFR is moving down, whether from 1.9 to 1.8 or from 1.5 to 1.4, so there’s still no reason to believe that a TFR of 1.5 is anything more than a temporary statistical artifact.

  12. “In other words, the European welfare state is DOOOOMED.”

    Pavel, you say this as if you thought it was a good thing. I fear you may be right, or at least not the whole welfare system, but the system as we know it now, but this doesn’t make me happy. And this isn’t just Europe, it is the whole planet bit-by-bit. This is a generalised process (not the ‘trap’ part, but below replacement fertility). So think of China, think of Turkey, think of Brazil…….

    Obviously Paygo exacerbates the situation, but I think you can make a loop like you did even without it. There is more to come next week on this.

  13. “So you can still colour me unconvinced…”

    Good, well that means the debate can continue. Drop by again in another six months (for the eurobarometer survey) and lets see if the data and the arguments are any more convincing or not by that time.

    “A hypothesis is when you say “you can’t return from a TFR below 1.5 because….”, and the ‘because’ is missing.”

    In a sense all we may be discussing is the use oof ‘hypothesis’ and the meaning of ‘because’.

    I suspect that if we had a because in the sense you wanted it, I’d be calling it a theory, and the idea clearly isn’t at that stage yet.

    It may, after all prove to be wrong.

    There do seem to be two issues though:

    1) Is there a no-comeback point
    2) If there is, where is it.

    I think we need to establish first whether 1) is the case (although funnily enough in order to do this we need to have an arbitrary reference point like 1.5).

    Also, putting the wording on one side, what level of possibility would you need to see established that such a hole is there before you would be prepared to support the idea that international agencies like the UN and the IMF should be trying to persuade developing countries in the danger zone (lets say below fertility 2,5 and losing height rapidly) to stop involuntary tubal ligation and the like before they actually crash.

    For example, my guess is we are already too late in the case of Thailand (now at 1.7 TFR).

    To be clear here: getting fertility down in the high fertility countries is essential, but the how is as important as the that, and you need a ‘soft landing’.

  14. A couple of questions:
    1. I wonder if the tipping point might be different for different cultures. It seems there is a paucity of data for Lutz’s study and it looks like the last 20 yrs. of European statistics is the main basis for his argument. I think he needs more data points.
    2. Pavel raises a good point. He has identified a free rider problem, and we can’t all be free riders. Incentives matter.

  15. I think the UN and IMF should be trying to persuade countries to stop involuntary tubal ligation anyway, no matter what their fertility level is.
    And I think European countries should be encouraging childbirth and immigration anyway (and should be dropping restrictions on immigration, regardless of TFR).
    The argument that many of the factors that lower fertility are mutually reinforcing is fair enough (even if not the full story). But arguing that you can’t rebound from a TFR below 1.5 simply because no-one has done so yet, when this phenonomenon is extremely new anyway, is like arguing that the fact that no-one has yet run a mile in under four minutes proves that it’s impossible.

  16. “I think the UN and IMF should be trying to persuade countries to stop involuntary tubal ligation anyway”

    Obviously I should have expected this response when I asked the question :). Will I never learn Of course I agree.

    @ Mitch

    “I wonder if the tipping point might be different for different cultures.”

    Yes, this is a good point. Curiously we find some interesting differences here. Take family policy. Those countries who have tied support to traditional families (as opposed to un-married couples) tend to have the worst record. This means in a strange sense that the pro-family lobby actually preside over its disappearance.

    Again Macdonald draws attention to the institutional mis-match between home and work, with the woman having a lot more emancipation in the labour force than she does at home. The time use surveys suggest this too. The south and east european countries tend to have the worst-supportive male partners, and the most pro-traditional-family laws, and the end product is less children, so yes, culture is important, but it may be more important in determining whether you drop to lowest-low fertility rather than defining what this means in any given social context.

    In fact the more I think about the argument the more qualifiers I can see that need to be put. I think this is why I enjoy this kind of post, because it makes me think. So you are right this is really only derived from what current knowledge and experience we have, which is still pretty limited.

    One point in Lutz’s defence, and this goes back to Ray, would be that there is no justification whatsoever for assuming replacement homeostasis. Most policy is currently based on some such assumption.

    Lutz’s strong point would be that we really have no idea what could be a lower limit to fertility. It could keep dropping and dropping as life expectancy increases. This adds strength to Ray’s argument, the 1.5 isn’t a magic number, fertility could in theory drop below 1.0 at some stage. I can’t see any in-principle reason why not.

    So the 1.5 is only a ‘magic number’ in the transition dynamics of those european countries involved, Japan, the Asian tigers etc. That is it is the drastic nature of the drop that creates the problem, the speed with which it has happened.

    Anyone who wants to see the countries below 1.5 could go here:

    http://www.edwardhugh.net/tfr.html

    “I think he needs more data points”.

    I think we all need more data points, but they will come, they will come.

  17. Random thoughts:

    (1) One of the factors likely involved in decreased fertility and/or later childbearing is the ability of grandparents to assist in child-rearing, especially when children are small. Urbanization has disrupted this process, but perhaps this is only a transient associated with urbanization. Once urbanization is essentially complete, both parents and grandparents live in the urban area, and the family support network is restored. (The counter-scenario is the one in which urban areas with below-replacement fertility continually make up their fertility deficit with immigration and within-borders migration from less urban areas with above-replacement fertility, and the urban population is perpetually in a state of social displacement.)

    (2) For all the talk of ‘sequencing,’ i.e., women establishing their careers, and then starting a family, given the greater periods of time career-oriented poeple spend in education, it seems unlikely that a woman starting a family in her early or even mid-thirties can really make up for lost time before very real biological limits on fertility kick in. Another real possibility in sequencing, though, is family and then education and career, raising children to school age, and then embarking on becoming a provider-type herself. Of course, this requires stable unions forming between rather young women, and men a few years their senior, which doesn’t match well with today’s mate-selection behavior.

    (3) Conceptually, I can see a rationale in a ‘point of no return,’ in low fertility, separating the situation in which potential child-rearers could raise larger families, but either overestimate risk or choose to consume elsewise, and the one in which potential child-rearers could not (without real perceived hardship) raise larger families, even if they wanted to. The first case (risk-aversion or altered ideals) can be addressed by things like unemployment insurance or even mere exhortation, while the second case cannot. I do not, however, see a reason for a specific TFR to separate the two cases, but rather see that the two cases may lead to rather different TFRs. In particular, I see every reason to suspect that much of post-Communist Europe entered the second state when the social services collapsed, and thus these states have very low fertility.

  18. I had a long reply, but somehow it disappeared. But I thought this study (pdf) was interesting because it tried to establish which costs and which benefits people are comparing when they decide to try to take children.

    The impact of perceived costs and rewards of having a child on the actual timing of entry into parenthood is examined among women and men. To this end, data are used from a five-wave panel survey among Dutch young adults spanning 13 years. Expected costs and rewards are found to influence the timing of parenthood among both women and men.

    Anticipated costs to one’s career and to one’s level of individual autonomy and an anticipated increase in one’s sense of security affect the timing of entry into motherhood. Anticipated costs to one’s career and spending power, and anticipated rewards in terms of one’s sense of security and quality of the partner relationship affect the timing of entry into fatherhood.

    And here (pdf) you find the tfr’s of the various OECD/EU countries in 1980, 2003 and 2004

  19. “when they decide to try to take children”.

    Very interesting choice of words DutchMarbel. I say this because of your use of “kinderen nemen” rather than the old form “kinderen krijgen”. This change (which some sociologists claim is part of a whole second demographic transition behavioural and ideational shift) was identified by Dutch researcher Gijs Beets.

    The arguments about why people postpone childbearing are many and complex. I have a (long) summary here:

    http://www.edwardhugh.net/secondstage2.html

    In the midst of this piece you will find this:

    “Here it is possible to identify another important break with the contraceptive patterns prevailing until the 1960s (or later in many countries), since initially contraceptive efforts were mainly focused on preventing additional pregnancies after a couple reached their desired family size. However this is certainly no longer the case and Beets et al. (2001: 21) have aptly drawn our attention to the way in which in the Netherlands modern contraception has changed the perception of sexual relationships within partnership from one of ‘getting children’ (kinderen krijgen) to a decision-making process over whether or not to ‘take children’ (kinderen nemen).”

    I don’t read Dutch, and only picked up this point in secondary literature, but it did strike me and seem interesting.

    The reference is this:

    Beets, G., E. Dourleijn, A. Liefbroer, and K. Henkens. 2001. De timing van het eerste kind in Nederland en Europa. Raport No. 59, NIDI, Den Haag.

    Thanks for your link. Basically I think these points are valid, but that the problem is – as I say – a complex one, and, even though I’m an economist, I don’t think a simple economic causal reductionism is sufficient. The social and the cultural (and the biological evolutionary – this argument I will try and make in a last xmas post I think) interact with the economic and vice versa.

    “the timing of entry into motherhood.”

    I think this is the key question and we need a multi-causal version of life event/life cycle/ life history theory here.

  20. @ Robert

    As always, interesting thoughts.

    “For all the talk of ‘sequencing,'”

    This is the Mary Blair Loy argument:

    http://www.hup.harvard.edu/catalog/BLACOD.html

    “it seems unlikely that a woman starting a family in her early or even mid-thirties can really make up for lost time before very real biological limits on fertility kick in.”

    Completely agree, this is why postponement not only displaces childbearing but also leads to fewer children at the end of the day. There is now a lot of evidence accumulating on this.

    “Another real possibility in sequencing, though, is family and then education and career, raising children to school age, and then embarking on becoming a provider-type herself.”

    This is an argument Lutz has been exploring. For this to become a reality we would need a big shift at the institutional level to facilitate it, a much more flexible work and education structure.

    “Of course, this requires stable unions forming between rather young women, and men a few years their senior, which doesn’t match well with today’s mate-selection behavior”.

    This was, of course, one of the defining characteristics of the European marriage pattern which prevailed *prior* to the industrial revolution. Mate-selection is though often mentioned in the literature, but not quite in the way you use it. One factor in displacement – so the story goes – is that the ‘boys’ are happy to wait since they want to acquire a lot of technology products, while the ‘girls’ are only too happy to indulge this since they want to wait to see how reliable their partner actually turns out to be. Selection-wise – so the argument goes – women, having seen what happened to their parents, are becoming more demanding.

    “In particular, I see every reason to suspect that much of post-Communist Europe entered the second state when the social services collapsed, and thus these states have very low fertility.”

    Agreed, and the point you make in this paragraph is generally interesting.

    “The counter-scenario is the one in which urban areas with below-replacement fertility continually make up their fertility deficit with immigration.”

    Or there is even more negative feedback as the few young people there are pack up and leave: look at the former DDR, or Bulgaria. It would be interesting to know more about what is happening in Latvia, Lithuania and Estonia.

    On grandparents, there is an interesting argument I found in Cavalli-Sforza. Basically historically grandparents have been important in the socialisation process for some of the reasons you describe. Also, since they embody previous experience, they transmit culture to the grandchildren in their care. Now: accelerate technological change. The relative value of accumulated wisdom declines, and speed and flexible learning become relatively more important. The historic bond is weakened, and this, I think we can see working out in practice.

    Obviously though, with the relatively lower labour mobility you find in Southern Europe the ties to the grandparents are greater.

  21. @ Pavel

    “but his reasoning is weak”.

    Maybe, but you need to be careful if you want to throw stones:).

    “makes people believe they need no children as a “pension insurance”.”

    Well I’m not sure what you mean by make here. And anyway, it is not only PAYG that has these properties (assuming old age insurance does the work you want it to) since fully funded systems – either public or private – have the same property. The problem with PAYG is that they are not sustainable with pyramid inversion, but this is another argument.

    “Tax burden on labor is growing. As a result, labor is being replaced by capital.”

    Or the company simply moves elsewhere. There are limits to (diminishing returns ones) to capital/labour substitution. Basically I think the principal impact is reducing job creation (the tax wedge argument in Germany) and off-shoring.

    “Youth unemployment is high, causing people bear less children.”

    Again, I’m worried by what ‘causing’ means here. Basically I think your simple model is fine to give an example, but I’m not convinced it is any better than Lutz’s. I do however thing there are much stronger economic arguments to offer than those Lutz – who is a demographer at the end of the day – has at his disposal. OTOH as I keep saying, I don’t think you can understand this whole process simply with economic materialism.

    Mitch says:

    “Pavel raises a good point. He has identified a free rider problem, and we can’t all be free riders. Incentives matter.”

    I agree with this. But in some ways this means more welfare state to incentivise and support those who have children, and here is where the negative feedback kicks-in, since the fiscal burden of having so many elderly (which is incidentally not the same problem as the fertility one, people are also living longer) means resources are scarce it is hard to find the money to pay for this type of change.

  22. I agree with this. But in some ways this means more welfare state to incentivise and support those who have children

    Or less for anybody else. However, a state pension is a very delayed reward and very much in doubt for demographic reasons anyway.

    The relative value of accumulated wisdom declines, and speed and flexible learning become relatively more important

    Aren’t we just seeing a transition phenomenon between rural grandparents and urban parents?

    Of course, this requires stable unions forming between rather young women, and men a few years their senior, which doesn’t match well with today’s mate-selection behavior

    Or the radical opposite. Fully state provided childcare. It worked in eastern europe.

  23. “How long till we have the needed technology to in vitro gestation?”

    Interesting question. This isn’t my field so I really can’t help, but everything I’ve seen seems to be suggesting that this isn’t as easy as it seems. At the moment treatments are often costly and difficult.

    Anyone else out there able to add anything?

  24. Anyone else out there able to add anything?

    Why would it be needed? Do you want to put the children into state orphanages?
    Or do you propose to prolong the fertile age this way? This isn’t helpful. The uterus is functional long after egg quality has gone down the drain. Furthermore, for the forseeable future a surrogate mother is cheaper and certainly much safer.

  25. Don’t forget that delay equals less growth. This is because even given the same family size, the compounding effect diminishes the growth rate by stretching the compounding period. For example, if I offered you 2% interest measured over a year, that would be more money than 2% measured over 2 years. People are also subject to compounding. If you also diminish the nominal rate to 1% after 2 years, you get even less money. Family size and age at first birth both matter.

  26. One factor in displacement – so the story goes – is that the ‘boys’ are happy to wait since they want to acquire a lot of technology products, while the ‘girls’ are only too happy to indulge this since they want to wait to see how reliable their partner actually turns out to be. Selection-wise – so the argument goes – women, having seen what happened to their parents, are becoming more demanding.

    While this description has versimilitude, in and of itself, I don’t see that it should necessarily delay the age at which women marry and reproduce. Men’s desire to delay marriage to do other things, whether it be playing with gadgets or sowing one’s wild oats, need not in and of itself affect fertility, and women can (and traditionally did) see how men will turn out by looking at men a few years older than them, who have already turned out. A third ingredient is needed, something to enforce a constraint that the age difference between prospective partners be small, in order for these factors to delay women’s union formation and childbearing.

    The first possibility that springs to my mind is that the structure of modern educational institutions instils in children the habit of forming peer groups of very narrow age distributions, a habit that is only beginning to wear off as men and women begin to seriously consider mate selection. If this is an important factor, one would expect a positive feedback at low fertility levels, where a significant portion of the population has no siblings, and thus has no exposure to their siblings’ peer-groups, a significant source of age-mixing among children.

    A second possibility relies on some rather controversial research, whose authors I unfortunately can’t recall at the moment. The gist of it is that for a variety of tasks, male performance and female performance have very similar means, but male performance has a broader distribution. If it is true that in the labor market, men and women are about equally valuable, but there are more male outliers on both the high-value and low-value ends, then the following scenario is possible.

    In a preindustrial society, where large family size and a high rate of non-reproduction (whether through childlessness or premature death) coexist to give roughly stable demographics, family units will tend to be led by high-value males, who can afford to choose a mate primarily in terms of her reproductive value. A younger woman has greater (potential) reproductive value than an older one.

    But where it is only a low-value minority that fails to form a reproductive unit, then when prejudices against women are banished from the marketplace of labor, the value of the woman’s market-labor becomes a significant influence in men’s mate-selection behavior; indeed under some plausible conditions women could become the more valuable partner in a majority of couples. Then, it behooves men to wait to find out how their potential spouses will turn out as much as it does women, and women’s investment in education and career-building early in life is as much courtship behavior as it is for men, and obviously both genders can’t shortcut the waiting process by marrying older partners: hence a tendency for similarly aged people to marry, but at a later age.

  27. Pregnancy isn’t exactly health and leads to mothers to be to be out of the workforce for 3 months or so. This alone is a good reaon why it would be a good idea. There are also a lot of reasons why it is a bad idea but that is something else.

    Also surrogate mothers are not exactly in great supply so it is not a way to produce babies on scale

  28. Having an equal partnership when one of the partner is older is difficult and if women wants an equal partnership, especially in which one, the women, is more equal than the other, than they need to marry men of about their age or younger.

    But there is also the problem of the question if it would be rational for people to have children when they are young and i don’t believe that this is the case. When you get kids when you are young(early 20’s) you don’t have money for their education which is a very important decider of their future succes and when when you are old then they will also be old and so unable to help you

  29. When you get kids when you are young(early 20’s) you don’t have money for their education which is a very important decider of their future succes

    We are seeing low birth rates in countries with free education.

  30. Money still lets you buy a better education even if it is free. But you do have to move to the suburbs for that

  31. But you do have to move to the suburbs for that

    Where do you live? It is very hard for me to reconcile this with what I see around me. In the part of Europe I live in, the best schools are in the older parts of the cities.

  32. Edward,

    Here’s what I mean by “PAYG makes people believe they need no children as a ‘pension insurance'””:

    http://www.nber.org/papers/w11121
    Social Security, Demographic Trends, and Economic Growth: Theory and Evidence from the International Experience. Isaac Ehrlich, Jinyoung Kim, NBER Working Paper No. 11121, February 2005

    Short conclusion: Pay-as-you-go systems CAUSE low fertility rates.

    There’s another purely economic mechanism that may cause low birth rate: monetary expansion. CPI baskets are mostly based upon prices of tradable goods. Since property prices are basically excluded from inflation calculations, home prices may rise beyond affordability of most young people. Hong Kong, for instance, has very basic PAYG system, but expensive housing. Birth rate is very low as a result of that. Go and have a family when a modest flat costs ten annual salaries or so!

    Now combine PAYG and high property prices, and what you get: a strong contraceptive.

  33. Well, and I’m not saying that Lutz is utterly wrong. I only argue that his line of argumentation is not particularly strong – I don’t say his arguments are mistaken.

  34. “I only argue that his line of argumentation is not particularly strong”

    Yes, well I accept this in some sense. I take Ray’s point that this is a new situation, and that Lutz’s is a new theory, and as such I respect him for having come up with it. Of course arguments can be improved, I absolutely agree. I have some suggestions myself :).

    “Short conclusion: Pay-as-you-go systems CAUSE low fertility rates.”

    I’m afraid I don’t buy this. I think – in biological evolutionary terms – life expectancy and fertility are connected. I’m working on my ideas on this right now. At some stage I will post something.

    The person who has done most original work in the line which interests you is Berkeley demographer Ronald Lee. I have to dash now but will put some more links later.

    Basically, of cousre there is a link between pensions (whether Paygo or otherwise) and fertility decisions, but it is just one small part of the picture. More later.

  35. @ Pavel (1)

    OK, I’ve been able to grab a bit of time to think about this. Firstly, I’m not saying that having pensions insurance doesn’t form part of the picture, what I don’t see is why it matters if the scheme is PAYGO or fully funded. If it is fully funded you should feel even more confident that you will have a pension, on this account, and therefore should reduce your fertility even more. Indeed, as I recall, you accept some version of rational expectations theory (which I am much more wary about), but if people were fully rational, or even pretty rational, wouldn’t they now see that these pension systems (both private and public) might one day crash, and hence have more children just in case?

    Actually, fertility continues its steady decline.

    Now Ronald Lee has some interesting material on all this. First an Article on “Age Structure and Dependency” written for the Encyclopedia of Population.

    Then this article on intergenerational transfers again written for the Encyclopedia of Population.

    This paper: Demographic Change, Welfare, and Intergenerational Transfers: A Global
    Overview, is much more comprehensive and looks at the issue in historical perspective from hunter gatherers to the present day.

    And if you really want some state-of-the-art theory you could do worse than this one:
    Rethinking the evolutionary theory of aging: Transfers, not births, shape senescence in social species

    Here’s the abstract:

    The classic evolutionary theory of aging explains why mortality rises with age: as individuals grow older, less lifetime fertility remains, so continued survival contributes less to reproductive fitness. However, successful reproduction often involves intergenerational transfers as well as fertility. In the formal theory offered here, age-specific selective pressure on mortality depends on a weighted average of remaining fertility (the classic effect) and remaining intergenerational transfers to be made to others. For species at the optimal quantity–investment tradeoff for offspring, only the transfer effect shapes mortality, explaining postreproductive survival and why juvenile mortality declines with age. It also explains the evolution of lower fertility, longer life, and increased investments in offspring.

  36. @ Pavel (2)

    Basically I don’t think you can understand this general phenomenon from within the confines of one single discipline. That is why the Lutz model is interesting since it combines some economics, some demography, and some social theory. I would definitely want to add-in evolutionary biology and evolutionary anthropology. Here are three papers to give you some idea of the extent of this. What we need IMHO is some integration of the following traditions:

    Life History theory. Hillard Kaplan is a good example, here are a couple of papers:

    Embodied Capital and the Evolutionary Economics Of the Human Lifespan

    An Evolutionary and Ecological Analysis of Human Fertility, Mating Patterns and Parental Investment.

    The sociological Life Course Theory. Here’s an illustrative paper:

    Whose Lives? How History, Societies, and Institutions Define and Shape Life Courses by Karl Ulrich Mayer

    The Economic Life Cycle Saving and Consumption Theory

    Here’s a summary of the state of play on this from Princeton economist Angus Deaton:

    “Franco Modigliani and the Life Cycle Theory of Consumption”

    Well, I think there’s enough in all that to chew on :).

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