Adrian Nieto Castro

Permanent employment and the fertility decision

Abstract:  This paper shows that permanent employment contracts are important drivers of the fertility decision. I provide causal evidence by using variation in subsidies to employers transforming temporary jobs into permanent in Spain as instrument for permanent employment. The amount of the subsidy substantially varies across regions, with the age and gender of the workers whose contract is converted, and within these three dimensions over time. Using a large administrative individual-level panel dataset, I show a novel set of results after accounting for endogeneity. Permanent contracts increase fertility decisions among men, but have a negligible effect for women. The effect is also lower when individuals do not cohabit with a partner, have a high wage growth, or are young, suggesting that permanent employment increases fertility less when the opportunity cost of children rises. Based on a different regional level dataset, I both replicate the findings from the main analysis and quantify the aggregate effects of the subsidies, which raised fertility by 2% at a cost of 13,300 euros per child.

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