Friday, February 01, 2008

What Will Economists Say to Get Quoted in the New York Times?

While I haven't done a formal analysis, I've always thought that the New York Times likes to quote Harvard professors. I know that they are an excellent set of scholars but holding "quality" constant, Harvard is an outlier. In such a world of "Harvard Discrimination", non-Harvard academics either have to do something impressive or say something sufficiently strange to merit being mentioned in the Times.

Recall Gary Becker's PHD thesis --- if a group such as women are discriminated against in the labor market then the select set of women who do get promoted to partner at a law firm must be extraordinary.

With that drumroll, I now present an article in today's New York Times with a sufficiently wacky quote from myself. John Leland is a very smart guy. While his core thesis was a little off-beat, I sensed that he was looking for some intellectual "firepower" to back up his thesis. You will see that he creates some tension below ---- citing 2 academics who call his idea cute but small potatoes and then uses me to buttress his claim.

New York Times
February 1, 2008
Reporter’s Notebook
From the Housing Market to the Maternity Ward

For the first time in 35 years, America’s total fertility rate — the estimated number of children a woman will have in her lifetime — reached 2.1, the theoretical level required to maintain the country’s population, according to recent data from the National Center for Health Statistics.

Demographers caution that it is too soon to say whether the increase is a blip or a trend, or to determine its causes, which may include changes in the economy, immigration and the availability of abortion. “All this could turn around on a dime,” said Stephanie J. Ventura, chief of the reproductive statistics branch of the statistics center.

But at a time when no cocktail conversation is complete without a discussion of real estate, the boomlet raises a question that has long interested social scientists: What is the relationship between fertility and real estate?

In the wide-open mortgage climate early this decade, creative loan products allowed more people than ever to buy homes, often a precursor to having children. In 2006, the babies arrived — a reminder, perhaps, that if you build it, they will toddle.

Is real estate destiny?

“It’s something a bunch of us have been thinking about,” said Morris A. Davis, an assistant professor of real estate and urban land economics at the University of Wisconsin-Madison School of Business. “If you reduce down-payment constraints, more people can buy homes, or buy bigger homes. Does that encourage them to have more kids? I would say nobody knows.”

Social scientists have long traced a connection between housing and fertility. When homes are scarce or beyond the means of young couples, as in the 1930s, couples delay marriage or have fewer children. This tendency helps account for the relatively dismal birth rates of many developed nations, said Robert Engelman, vice president for programs at the Worldwatch Institute, an environmental research organization, and author of the forthcoming “More: Population, Nature, and What Women Want.”

“One reason there are so few children in Italy is that housing is so hard to come by,” Mr. Engelman said. “Houses are bigger in the U.S. and generally more available. That may help explain why Americans have more babies.”

Several population specialists emphasized that housing is just one influence on fertility, and difficult to tease out from other factors, like income or optimism. “If you lower the cost of housing, you’re going to lower the cost of raising a child,” said Seth Sanders, director of the Maryland Population Research Center at the University of Maryland. “But if you look at how much it costs to raise a child, only one-third of the cost is housing. So my guess is that the impact is not very large.”

But Matthew E. Kahn, an economist at the Institute of the Environment at the University of California, Los Angeles, suggested another way housing trends might be complicit in the baby boomlet of 2006. For decades, Americans have built increasingly bigger houses, even as family size declined. Bigger houses mean incentives to stay home and fructify, Mr. Kahn said.

“Those ARM-financed McMansions are in the middle of nowhere, where land is cheap,” he said, using the acronym for adjustable-rate mortgage. “That increases the time it takes to get to work, meaning it raises the cost for women to go to work. That should increase fertility.”

The 4,265,996 babies born in 2006, the most since 1961, reflect increases in birth rates for women in all parts of the country and nearly every demographic group studied — including teenagers, whose rate had dropped every year since 1991. The only decline was among girls under 15.

But that does not mean the new arrivals look like their parents’ generation. For starters, they are much more likely to be Hispanic, to live in a red state and to be part of an evangelical Christian family.

Hispanic women in 2006 gave birth at a rate corresponding to lifetime averages of 2.96 children per woman, compared with 2.11 for non-Hispanic black women and 1.86 for non-Hispanic whites. The fertility rates for Hispanic immigrants were higher than those in many of their countries of origin, including Mexico, where the rate is 2.4, according to the Pew Hispanic Center.

General birth rates were highest in Republican strongholds like Utah (94.1 births per 1,000 women), Arizona (81.6), Idaho (80.9) and Texas (78.8). They were lowest in states won by John Kerry in 2004, including Vermont (52.2), New Hampshire (53.4), Maine (54.5), Rhode Island (54.6) and Massachusetts (57). The rate in New York was 61.1, well below the national average of 68.5. The rate in New Jersey was 64.4; in Connecticut, 58.8.

The report does not include information on religion or socioeconomic status, but researchers have long linked religious observance and affiliation with higher rates of fertility, even attributing the growth of evangelical churches and decline of mainline Protestant churches to differences in fertility rates.

In a 2007 survey by the Pew Research Center, 79 percent of evangelicals said they had children, compared with 73 percent of nonevangelical Protestants and 62 percent of those who described themselves as secular. For Catholics and Protestants, the more often they attended services, the more likely they were to have children.

Ms. Ventura of the health statistics center said it was unusual that 2006 birth rates rose for both teenagers and older women. In the past, a strong economy “contributed to a decline in the teenage birth rate, because they saw they could get good jobs, so they put off childbirth,” she said. “For older people, a good economy makes them say, ‘We can afford to have another child.’ ”

With their low birth rates, Europe, Japan, China and parts of the Middle East face the burden of shrinking productive work forces and aging populations (a vicious cycle: gloomy economic prospects lead to low birth rates, which lead to gloomy economic prospects). For the United States, then, the boomlet is a healthy sign, said Michael Rendall, director of the Population Research Center at the RAND Corporation, a research group. “It’s not a huge amount, but it’s a sign in a positive direction. Timing is very important.”

Mr. Rendall considered the cohort born in 1960, at the height of the baby boom. In 2040, when that group turns 80, the people born in 2006 will be in their prime earning years, he said. “The baby boom peak will be benefiting from 34-year-olds born in 2006. They’ll be in the labor force just in time.”

The recent downturn in the economy and the housing market bodes poorly for a continued boomlet. Last year, the National Association of Home Builders reported that houses had stopped growing. Foreclosures discourage people from having children. “What could be happening now is that people will have wealth shock, and reduce need for everything, including children,” said Mr. Sanders of the Maryland Population Research Center.

Which would drive down house prices, making homes more affordable. Which could start the cycle again.