Poverty dynamics and fertility in developing countries

The link between population growth and economic wellbeing is one of the most disputed research areas among economists and demographers. Whereas existing studies have relied on either cross sectional micro data or aggregate level data, this study will revisit this long-standing issue by exploiting recent longitudinal data sets. We will make use of very detailed and recent longitudinal surveys from Indonesia, Ethiopia, Vietnam, and Albania, with the aim of producing a comparative analysis of poverty and demographic inter-relationships. An important contribution of this study is the recognition that life events such as childbearing, education, health, and employment are not exogenous with respect to poverty transitions. The aim of our study is therefore to implement recent and advanced econometric methodologies, such as treatment effect models and simultaneous hazard regression, that can identify causal relationships, and therefore inform policy makers about what policies may - or may not - work in reducing poverty. Substantive Research Questions include: What evidence is there for a recursive relationship between poverty and fertility? What is the role of other crucial processes - such as education, health, and employment - in terms of the relationship between poverty and fertility? What is the role of the same processes when we differentiate between chronic and transitory poverty? To what extent are differences in these behavioural patterns explained by regional variations in education, health and other social polices? To what extent are the results influenced by the way poverty is measured (Absolute versus relative measures of poverty - poverty status versus deprivation indices.) ?

The first goal of the Millennium Development Goal set out by the United Nation is the eradication of extreme poverty and hunger by 2015. There is no single cause for poverty, but a great amount of attention has been paid to the relationship of poverty and fertility for its policy implications. The objective of the project, "Poverty Dynamics and Fertility in Developing Countries" is to enhance our understanding of the causal relationships between poverty and fertility. This research contributes to making improvements to policies aimed at reducing both poverty and population growth, by conducting a rigorous and robust empirical modelling and analysis. Within the project we make use of some recent and very detailed longitudinal surveys from Indonesia, Ethiopia, Vietnam, and Albania. A first step of the project resulted in a comparative analysis of poverty and demographic interrelationships in those four countries. Our analysis shows that together with recent market reforms and improving land tenure rights, Indonesia, Vietnam and Albania seem to have developed the appropriate foundations for reducing poverty and fertility. It seems clear that a similar replication in Ethiopia will take time and effort, and will certainly require long-term commitments in more than one area of societal developments. We next investigated the effect of (A) fertility on poverty and the effect of (B) poverty on fertility by separately focusing on the case of Indonesia. We took two approaches in seeking for the effect of fertility on poverty (A). The first approach was to directly measure the effect of a newly born child on household consumption. The second approach was to estimate the effect of fertility on the major source of household income, or male and female labour income using the variation of fecundity among women. The analysis suggested that there is no decisive evidence for the negative effect of fertility on household welfare in the short run. Regarding the effect of poverty on fertility (B), we considered natural disasters an aspect of poverty. Using six different kinds of self-reported economic hardships, our findings indicated that coping mechanisms are rather efficient for Indonesian households that perceive an economic hardship. Only in case of unemployment did we find a significant decrease in consumption spending and educational expenditure while fertility increases. These results indicate that households which perceive an unemployment shock use children as a means for smoothing consumption. One important lesson from our findings is that different types of income shock may lead to different adjustments in economic and demographic behaviour and therefore require specifically targeted social insurance programs. To sum up, our research output makes a few suggestions concerning the way people think about the relationship between poverty and fertility along with economic development. First, fertility increases the incidence of poverty, but the magnitude is often exaggerated because of the measure of poverty and because of the increase in male labour supply in response to a newly born child. Second, natural disasters affect not only fertility but children`s education and other forms of consumption, and households adopt different coping strategies for different types of disasters.