Robots, Career Cost, and Fertility Timing

The paper presented in this Mannheim Applied Seminar links the effects that automation has on labor to fertility timing decisions. The intuition behind such a relation is formalized by an optimal stopping model of fertility. Having a child is viewed as an investment with a stochastic opportunity cost, which changes due to the displacement or the creation of jobs. The numerical application of the model suggests that the effect of an increase in automation on the value of postponing fertility is concave with respect to education. European panel data at the regional level are then used to give empirical support to the theoretical predictions, by constructing a measure of local exposure to industrial robotics, and by adopting a Fixed Effect and Two Stages Least Squares methodology. Higher exposure is associated with a postponement of fertility in regional labor markets where women tend to have a middle level of schooling, and with an anticipation of it in regions where they tend to be low- or high-educated.