Peer Effects in Fertility - The Effect of Children in the Neighborhood

Marie Louise Schultz-Nielsen 1
1Rockwool Foundation Research Unit, Denmark, 2IZA, Germany

In this study I examine whether there exists a neighborhood effect in childbearing. The focus is on the subsequent fertility of women who have a neighbor who has just had her second child. To provide exogenous variation in the number of children neighbors have, I use a well-known instrument, namely that of having the two first children of the same sex versus having children of different sexes. To investigate whether the fertility of neighbors has any effect on the fertility of other women aged 21-35 years, women in a neighborhood are divided into two groups according to whether the neighbor's first two children are of the same sex or not. I argue that these women are randomly selected and on average have the same characteristics regardless of whether their neighbors have two children of the same sex or not. Therefore any remaining difference in the number of children these women have later is a sign of a neighborhood effect. The empirical results suggest that such neighborhood effects exist.

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