Seminar: Sekyu Choi, University of Barcelona.

Title: Fertility Risk and the Life-Cycle.

Two out of every four pregnancies is deemed unwanted by women in the United States. Around half of those are aborted. Given that children represent important expenses for households in terms of money and time, the presence of this prevalent (and "unremedied") unwantedness speaks about sources of non-monetary shocks that can determine aggregate differences in life-cycle consumption, savings and inequality across individuals.

In this paper I present a life-cycle model of fertility decisions in an environment where agents are subject to uninsurable labor income shocks and are unable to control perfectly the timing of preg-nancies, the latter being a novel feature in life-cycle economies with incomplete markets. My model also takes into account that fertility choices are intertwined with both labor and marriage market conditions which are heterogeneous across individuals and determine how the trade-off between increasing family size and the status quo looks like for females during the life-cycle.

I estimate the model using data from the 1995 National Survey of Family Growth (NSFG), the Panel Study of Income Dynamics (PSID) and the Current Population Survey (CPS). By matching aggregate education-specific fertility and abortion profiles, I find that fertility risk (the degree to which individuals fail to obtain their desired outcomes) differs markedly by education groups and is an important ingredient in explaining the differences observed in the data. This result shows that fertility risk is a source of lifetime inequality -since it is more prevalent among lower educated individuals- and highlights the importance of incorporating endogenous and imperfect fertility decisions into life-cycle models when the studied environ-ments exhibit incomplete insurance.