Thomas Høgholm Jørgensen

"Saving Behavior around Intended and Unintended Childbirths"

Abstract

We investigate how fertility plans affect saving around childbirths. Households who plan on having children should accumulate wealth prior to childbirth to be able to transfer consumption from periods without children to periods with children. Households who do not plan on having (more) children should accumulate significantly less wealth. We estimate a model of fertility and optimal intertemporal consumption in which households have imperfect contraceptive control. In line with the theory, we find that households in British Household Panel Survey (BHPS) who plan to have children, save significantly more than those who do not plan to have children, and they reduce their saving rate when (intended) children arrive. Despite the forward looking behavior of households, the arrival of an unintended child tends to be associated with a smaller decrease in the saving rate, both in the data and in the estimated model. Thus, we can rationalize this saving behavior in the model and, finally, use it to estimate the non-pecuniary cost of an unintended childbirth