Higher education and the income-fertility nexus

Fertility and income are negatively related at the aggregate level. However, evidence from recent periods suggests that increasing income leads to higher fertility at the individual level. In this paper, I provide a simple theory that resolves the apparent contradiction. I consider the education and fertility choices of individuals with different learning abilities. Acquiring higher education requires an investment of time and income. As a result, people with higher education have fewer children but, controlling for the level of education, increasing income leads to higher fertility. Rising income and skill premiums motivate more people to pursue higher education, resulting in a negative income-fertility association at the aggregate level. I investigate the explanatory power of the theory in a model calibrated for the US during 1950-2010.