Now, I do understand that babies are technically produced rather than consumed, but I would hope that, in this age of medicine, the supply and demand for babies at least approximately equalizes. In this way, we can talk about them as either normal goods – goods where demand for them increases as income increases – or inferior goods – goods where demand decreases as income rises. (See here for a video refresher on the determinants of demand.) On a macroeconomic level, normal and inferior goods are roughly equivalent to cyclical assets, which rise in value during good economic times, and countercyclical assets, which rise in value during bad economic times, respectively.
Fewer babies were born in 2008 than the prior year, and it appears to be linked to the recession, a new study shows.
The number of births in 25 states where data was collected fell to 2.29 million in 2008, down from 2.33 million a year earlier, according to the Pew Research Center.
The birth rate — the share of women between ages 15 and 44 who gave birth – also fell in 20 of the 25 states. The overall birth rate dropped 1.6% to 68.8 births per 1,000 women of childbearing age.
The researchers relied on state level data to help parse the relationship between births and economic trends in the region. The 25 states surveyed account for 54% of all women of childbearing age in the U.S. and the same percentage of babies born annually.
“The analysis suggests that the falloff in fertility coincides with deteriorating economic conditions,” the report says. “There is a strong association between the magnitude of fertility change in 2008 across states and key economic indicators including changes in per capita income, housing prices and share of the working-age population that is employed across states.”
I find this interesting on a number of levels. My initial gut reaction is to say “wow, I’m impressed that people are being responsible in assessing whether they have the appropriate resources to properly raise a child.” Furthermore, it certainly is the case (not that I would know personally) that there are a lot of immediate costs associated with newborn babies. On the other hand, the ability to raise a child from a financial standpoint depends on a family’s financial situation over the next 18 years or so, not just on today’s circumstances. This suggests that households either expect this recession dealie we’ve got going on to persist for a really long time or they are overweighting current conditions in their decision-making processes. In general, people tend to overestimate the degree to which the future is likely to look like the present. (Adjustable-rate mortgages, anyone?)
Economically speaking, contraception is a substitute for children (yeah, I went there), so if households see the recession as causing an effective price increase on children, the demand for birth control should increase as a result. Does this also mean that birth control pills count as an inferior good?
Update: So I was half kidding about the birth control thing, but apparently I wasn’t far off. Shortly after finishing this post, I came upon an article entitled “Is the Crappy Economy Causing Men to Neuter Themselves?”. Apparently there’s some empirical evidence that vasectomies are inferior goods or countercyclical assets or whatever. Ouch.