EFFECT OF RELATIVE COHORT SIZE ON FERTILITY : A CROSS COUNTRY STUDY

Abstract

The central idea in the Easterlin hypothesis is that relative income governs fertility decisions of young couples. Relative income is defined as the ratio of earnings potential to material aspirations. To facilitate the empirical testing of the hypothesis, Easterlin suggested to use relative cohort size (RCS) to proxy relative income. He argued that the abundance of young workers relative to older workers would push down the income of these young workers, thereby reducing relative income. It follows that relative income is positively related to RCS = N30_64/N15_29 , where N represents the total population of respective age groups. Consequently, the higher the RCS, the higher is the fertility level of a given cohort. The Easterlin hypothesis has drawn support from United States data. However, the Easterlin hypothesis seems to lose its validity for the six Asian countries studied in this exercise: Japan, Republic of Korea, Singapore, Peninsular Malaysia, Sri Lanka and Taiwan. We have taken the data through three analyses: graphical, regression and age-period-cohort analysis. There appears to be no disagreement in the conclusions reached from the different analyses across the six countries there exists no relationship between relative cohort size and the total fertility rate. Relatively large cohort size exhibits no greater fertility than smaller cohort size. However, this conclusion is conditional upon the assumption that RCS is a good proxy for relative income. Thus far, the correlation between RCS and relative income has not been established. It is therefore premature to reject the Easterlin hypothesis based on this proxy of relative income. A further assessment of the Easterlin hypothesis is attempted by the use of an income ratio to proxy relative income for the case of Singapore. Interestingly, the results suggest that there indeed is a positive relationship between relative income and fertility as hypothesized. On the other hand, the relationship between RCS and relative income did not exist. The upshot of all these is that: to the extent that the RCS is rejected as a proxy for relative income; the Easterlin hypothesis remains valid for the case of Singapore.