Are children really inferior goods? Evidence from displacement-driven income shocks

This paper explores the causal link between income and fertility by analyzing women\u27s fertility response to the large and permanent income shock generated by a husband\u27s job displacement. I find that the shock reduces total fertility, suggesting that the causal effect of income on fertility is positive. A model that incorporates the time cost of children and assortative matching of spouses can simultaneously explain this result and the negative cross-sectional relationship. I also find that a husband\u27s displacement accelerates childbearing, which is consistent with lifecycle models of fertility in which the incentive to delay is driven by expected earnings growth