Essays on the Microeconomics of Immigrant Fertility Assimilation

Summary Despite being a fertile field for testing and further developing theoretical economic models of fertility change, the empirical immigrant fertility literature has remained mostly isolated from theoretical models of fertility in economics. Unlike fertility transitions that take place over generations, immigrant fertility assimilation, which is the tendency of immigrants to move away from their native fertility norms toward those of their host country, is as common an occurrence as immigration itself. Different immigrant groups show different levels of fertility assimilation at any point in time. This high level of frequency and variation makes it a candidate for empirical research aimed at hypotheses and model testing. Fertility decision making is one of the topics that showcased the potential explanatory power of classical microeconomic models of the household beyond what is considered clas- sical “economic” decision making. Economic theories of fertility model a decision making process that social scientists traditionally did not deem to be of an economic nature. By mod- eling children as a commodity that can be assigned a price in the household’s optimization problem, it was shown that a classical model of the household can generate results in line with empirical observations. One of the major breakthroughs in that area was the successful work by Gary Becker, in which he developed a framework to theoretically explain the fertility transition towards lower fertility in developed countries by exploring the quantity-quality trade-off in fer- tility decision making, where fertility outcomes are not only measured by quantity—the number of children—but also by the quality of children—education and health, among other criteria. The model successfully demonstrated how a household’s optimal fertility changes when market parameters, such as income and prices, change. This cumulative dissertation consists of five essays with the aim of opening a channel between established microeconomic fertility theories and the immigrant fertility literature. A the- oretical component demonstrates how classical models of fertility in microeconomics can be used to motivate empirical hypotheses. To showcase this potential, the analysis focuses on so- cial interaction with natives and learning as a mechanism that can generate testable empirical hypotheses when integrated into a theoretical framework. Social interaction in general has been the focus of increased theoretical and empirical investigation in economics. Specifically in the area of fertility, social interaction plays an important role in shaping fertility culture. Although the immigrant fertility literature identifies factors that overlap with social interaction as drivers of fertility assimilation, such as education and language proficiency, this is, to my knowledge, the first attempt to link immigrant fertility assimilation and social interaction with natives, whether theoretically or empirically. Data from the German Socio-Economic Panel (SOEP) are used to test the association between immigrants’ social interaction with natives, measured by the incidence of home visits, and fertility assimilation. Primary data from a survey experi- ment are then used to test for the effect of learning on the propensity for fertility assimilation among Pakistani students preparing for emigration. The survey is further used to explore the underlying nature of fertility decision making by examining the exact factors the Pakistani students consider relevant for their fertility decision making in the context of their planned em- igration. Particularly, they are asked to state whether they consider economic factors the most relevant or base their fertility decisions on cultural concepts such as identity, family pressure, and family expectations. This, in turn, serves as further exploration of the nature of the under- lying mechanism of a potential association between social interaction with natives and fertility assimilation. Such an association can be a result of information transmission that informs im- migrants’ economic fertility decision making or simply a mechanism of societal pressure from having natives in immigrants’ immediate social network. The stated beliefs of the respondents offer insight into which of the two mechanisms is more likely to generate the association in question. The first essay introduces a fertility assimilation model based on social interaction with na- tives. The essay demonstrates how extending a classical quantity-quality model of fertility by embedding a Bayesian learning mechanism can generate results that resemble immigrant fertility assimilation. The model assumes that immigrants have biased information about the price structure of the quantity and quality of children, where the cost of quantity is the commodity cost per child, which is assumed to be observable, and the cost of quality comprises expendi- tures such as education and healthcare. The quality costs of children are strongly influenced by the institutions of the host country, about which immigrants do not have perfect information. Through social interaction with natives, who possess superior knowledge about host-country institutions, immigrants are capable of updating their beliefs about the host-country-specific price of quality. It follows from the model that a higher exposure to natives through social interaction leads to a posterior belief about the price of quality that is more in line with the natives’ beliefs, and thus to fertility assimilation. The exercise shows the unused potential of mathematical economic models to provide insight into contemporary fertility behavior. The second essay is an empirical investigation motivated by the theoretical framework. Using data from the German Socio-Economic Panel (SOEP), I find that the incidence of immi- grants engaging in home visits with natives is strongly correlated with fertility assimilation. In a sample restricted to first-generation immigrants from high-fertility countries, I find that the interaction through home visits is linked to a decrease in completed fertility by up to 56 chil- dren per 100 immigrants. A similar significant correlation is not reproducible using a placebo variable that measures visits to friends. Language proficiency, despite showing a similar posi- tive correlation with fertility assimilation, does not eliminate the significant association shown by home visits. An alternative independent variable measuring the strength of the sense of Ger- man identity among immigrants is used to test the hypothesis that mutual visits with natives are an indicator of cultural change in terms of propensity to integrate or a changed identity. It does not show a similar significant association. In the third essay, Bernd Hayo and I explore the nature of the underlying mechanism of fertility decision making, and eventually fertility assimilation, among immigrants. We use pri- mary data from the Survey on Fertility Plans and Attitudes among Pakistani University Students Preparing for Emigration. The survey collects stated preferences that directly relate to the theo- retical hypothesis discussed earlier. Concretely, the participants are asked about the factors that are relevant for shaping their fertility in general and also factors that are likely to drive them to change their fertility plans after emigration. The survey includes an experimental component where a treatment group is exposed to a statement indicating that immigrants tend to assimilate their fertility to that of their host country. We find that respondents consider economic factors to be the main factors that would affect their fertility decision making in general and also in the context of emigration. They give less weight to non-economic factors such as identity and social influence from the family, favoring factors that resemble economic modeling of fertil- ity over others closer to behavioral theories. Moreover, the treatment group shows a higher propensity for fertility assimilation, indicating that potential immigrants are willing to update their beliefs and fertility plans based on information made available to them. This hints at the potential relevance of a learning mechanism as described in the first essay. The fourth essay documents the Survey on Fertility Plans and Attitudes among Pakistani University Students Preparing for Emigration. It includes general information about the sam- ple and sample design, and the complete questionnaire in English and in Urdu—the original language in which the questionnaire was administered. Additionally, the distributions of all variables are presented in tabular form. In the fifth essay, I look at fertility preferences and beliefs of German and Pakistani youth from a comparative perspective. I identify variables in the SOEP and in our survey from Pak- istan that document respondents’ beliefs about the ideal number of children and the factors that affect their fertility decision making. While different answer scales and differences in the framing of questions prevent me from performing statistical analysis, I visually inspect the dis- tributions to form an impression of whether the core underlying logic behind fertility beliefs and intentions is different across cultures. I find suggestive evidence that respondents from both samples agree that mainly economic factors and constraints shape their fertility plans.