Does Economic Uncertainty Affect the Decision to Bear Children? Evidence from East and West Germany

Abstract

During their social, political and economic transition, the countries of Central and Eastern Europe experienced significant economic uncertainty. Many of these countries also experienced sharply falling fertility rates. There have been some suggestions that that these two phenomena are linked, i.e., that uncertainty has an impact of the decision to bear children. But the strength and nature of this relationship has not been examined carefully. This paper demonstrates the existence of such a link at the micro level using two different types of uncertainty measures based on GSOEP data from Eastern (and for comparison purposes also Western) Germany for the years 1992-2002. The results suggest that employment uncertainty (but not financial uncertainty) was considerably greater in Eastern Germany during its post-reunification transition than in Western Germany and had a highly nonlinear effect on the likelihood of childbirth. We also show that this uncertainty may have contributed significantly to the sharp drop in East Germany’s total fertility rate in the immediate aftermath of the reunification.