Discussion Paper

No. 2019-24 | March 12, 2019
The effect of house prices on fertility: evidence from Canada

Abstract

Persistent house price increases are a likely candidate for consideration in fertility decisions. Theoretically, higher housing prices will cause renters to desire fewer additional children, but home owners to desire more children if they already have sufficient housing and low substitution between children and other “goods”, and fewer children otherwise. In this paper, the authors combine longitudinal data from the Canadian Survey of Labour Income and Dynamics (SLID) and averaged housing price data from the Canadian Real Estate Association to estimate the effect of housing price on fertility in a housing market that has historically been less volatile and more conservative than its American counterpart. The authors ask whether changes in lagged housing price affect the marginal fertility of homeowner and renter women aged 18–45. They present results both excluding and including those who move outside their initial real estate board area, using initial area housing prices as an instrument in the latter case. For homeowners, they find evidence that lagged housing prices have a positive effect on marginal fertility and possibly on completed fertility, while for renters they find no significant effects.

JEL Classification:

D13, J13, J18, R21

Assessment

  • Downloads: 67

Links

Cite As

Jeremy Clark and Ana Ferrer (2019). The effect of house prices on fertility: evidence from Canada. Economics Discussion Papers, No 2019-24, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2019-24


Comments and Questions


Yehui Lao - comment
March 13, 2019 - 16:51

I think the study demonstrates an interesting fact that the house prices have a positive effect on the fertility preference of female house-owners in Canada. The potential channel of this effect is that the increase of house prices raises female house-owners wealth.

I would like to say that ...[more]

... maybe the authors can discuss a little deeper. For example, a rapid increase of house prices improves the wealth of house-owners, however, supposing that the family income is stable at a particular level, the increase of house prices increase the property tax as well. There may be a negative effect of marginal fertility offsetting a part of the whole effect. This further discussion may provide a policy implication.


Jeremy Clark - on offsetting rises in property tax
March 17, 2019 - 07:47

Dear Yehui Lao:
Thanks for reading our paper and commenting. You raise a good point that the positive wealth effect of a rise in house price for home owners will to some extent be offset by a negative income effect from rising property taxes. I think in many ...[more]

... jurisdictions in Canada there can be a 3-4 year lag before price rises get reflected in property taxes, but homeowners could certainly anticipate this.

So when we next edit the paper, we will include this point in an early section where we discuss what effects might be predicted.

Sincerely,
Jeremy Clark (and for Ana Ferrer)