Interrelation between births and the housing market: A cointegration analysis for the Spanish case

There are numerous studies that have analysed the demographic effects on the demand for housing. In addition, different studies have examined how housing market conditions affect family formation. This paper analyses the causal relations between the housing cycle and fertility in Spain during the period 1986-2014. Employing a model of the dynamic interrelationship between the housing cycle and fertility, this paper investigates how changes in housing supply affect decisions to have children, and how these decisions, in turn, have an effect on the housing market. The theoretical approach considers housing as an important associated cost of raising children, considering the latter as normal goods. The empirical evidence is obtained via the specification of an error correction model that allows short- and long-term adjustments in the variables. The domino effect of the long term on the short term is evaluated. The model thus obtained detects a long-term equilibrium between the two series, a cointegrating equation.