An Economic Analysis of the Relationship between Household Income and Fertility
This study aims to analyze the impact of husband’s income, wife’s income, and household income on fertility, using Japanese household survey data, the Japan Household Panel Survey. Permanent income of husband and households were calculated using the average labor income for the past three years, while the wife’s imputed wage rate is estimated based on the employment experience, educational attainment, and geographic information. In order to control the endogeneity of income and the heterogeneity of households, the instrumental variable method combined with fixed-effects estimation was applied. The results suggest that husband’s permanent income has a positive effect on fertility, while wife’s imputed wage rate has a negative effect on fertility. Household income, which is defined as the sum of husband’s and wife’s labor income, has a significantly positive effect on fertility.