Greater freedom to care for children, higher fertility?

Welcoming a baby into the world is an experience that many women and men dream of. For husbands and wives in “family-first marriages,” as Brad Wilcox calls them, children are a central part of the couple’s vision for the future. They can discuss ideal family size, a measure that determines the “fertility gap” between desired and actual fertility. However, when dreams of a family become a reality, the “ideal” is met with a number of unexpected costs that must be addressed (see Catherine Pakaluk’s recent work for a fascinating insight into the unexpected benefits). At the top of the list of new adjustments is how parents will allocate their time to include care for their little one.

Child care can be a headache, but it’s worth noting that parents in different parts of the country experience the child care market very differently, which can impact their family decisions. In a new working paper, Clara Piano, Lyman Stone, Vincent Geloso, and I examine the relationship between the intensity of child welfare regulation and variation in the fertility gap in the United States. Below is a map of the fertility gap and a map of Child Care Freedom Index scores, which are higher with less stringent regulations on licensed child care facilities. The common occurrence of differences in fertility is striking – 0.3 “children” is the lowest difference, and 1.3 – the highest. The images suggest an inverse relationship between these two values, which is confirmed by our statistical estimates.

Figure 1: Fertility gaps and child care laws across the United States

Source: Anna Clare Flowers, Vincent Geloso, Clara Piano and Lyman Stone “Child Care
“Regulation and the Child Gap” SSRN, May 20, 2024

We find that fewer childcare regulations, represented by higher “freedom” scores, are associated with a smaller fertility gap. To isolate the impact of child care laws, we included each state’s median household income, the percentage of adults who are married, the percentage of foreign-born adults, the percentage of adults who identify as religiously unaffiliated, and data on parents’ time use in to estimate the percentage of childcare according to the respondent’s gender. All of these factors have been shown to affect fertility.

The full analysis can be found in the working paper, but the economic significance of the results is as follows. If the state with the lowest regulatory score (i.e., Connecticut) scored the same as the state with the highest regulatory score (i.e., Louisiana), the gap would be reduced by almost 0.2 children. In Connecticut, where the total fertility rate was 1.51, the rate would increase to just above 1.70, an increase of 13%.

Child care is one of the highly regulated industries included in the Economic Freedom Index, and its intensity varies greatly from state to state. Although minimum staff education requirements, annual training hours, child-to-staff ratios, and group size requirements are intended to ensure child safety and quality, research examining the unintended consequences of these efforts reveals that many regulations are not effective or fit for their intended purposes. Moreover, they all contribute to the increase in the price of childcare services.

In addition to affordability, childcare freedom allows for more flexible arrangements and a wider range of options. This helps couples who want to combine work and family life, regardless of their career field. Our results are intuitive because, for example, parents who are on waiting lists for day care or who cannot afford to hire help are more likely to delay having children.

Research on economic freedom and the fertility gap has prompted further research on regulation, work-life balance, and family decisions. The identification of the relationship between regulatory restrictions on child care and families’ ability to thrive as expected supports the view that promoting economic freedom, particularly in key industries, is a family-friendly agenda worth pursuing.

Anna Claire Flowers is a PhD candidate at the Mercatus Center and a graduate of the FA Hayek for Advanced Study in Philosophy, Politics and Economics program.