Gender Wage Gap, Employment Dynamics, and Fertility

Abstract

The gender wage gap has narrowed in recent years, particularly among younger cohorts, coinciding with a decline in fertility rates. This study examines the impact of the decreasing gender wage gap in the labor market on fertility rates over the same period. Using panel data constructed at the county level from 2013 to 2023, a two-way fixed effects model was employed to account for unobserved heterogeneity in individual and temporal characteristics. The analysis reveals that a 10-percentage-point increase in women’s wages relative to men’s in the 25–39 age group is associated with a reduction of approximately 1.17 births per 1,000 women, indicating a negative effect on fertility. However, when incorporating the interaction effect with the gender employment rate gap, a significant positive interaction effect emerges. Simulation of the marginal effects based on the gender employment rate ratio demonstrates that when the employment rate ratio is 60%, a 10-percentage-point increase in women’s wages relative to men’s reduces the number of births per 1,000 women by approximately 4.57. Conversely, when the employment rate ratio reaches 90%, the number of births per 1,000 women increases by approximately 3.83. These findings suggest the presence of a substitution effect, wherein higher wages for women increase the opportunity cost of childbearing, thereby reducing fertility. At the same time, when the likelihood of women exiting the labor force due to childbirth is sufficiently low, higher wages may generate an income effect that positively influences fertility by enhancing household income.