A Simulation Analysis of the Effects of the Socio-economic Environment on Fertility and Female Labour Supply Decisions in the United Kingdom

The importance of contemporary trends in fertility and female labour supply is well recognised. Unfortunately, our understanding of these inter-related phenomena has been hampered by the difficulties that are associated with formulating a structural model of behaviour that reflects the joint nature of the fertility and labour supply decisions in the context of an uncertain future. In this paper we describe a model that we have developed to address these issues of concern. The model is calibrated to survey data for the cohort of women born in the United Kingdom in 1953, and its out-of-sample properties are explored with reference to data reported for the cohort of women born in 1963. Our analysis explains the observed delay in the timing of fertility, the reduction in completed fertility rates, and the rise in female labour market participation, as responses to the coincident decline in marriage and the growth of the labour incomes earned by women.