A test of the Easterlin fertility model using income for two generations and a comparison with the Becker model

Abstract

An important dimension of Easterlin’s seminal work on fertility is the hypothesis of intergenerational taste formation, or the relative income hypothesis. Previous estimates have not had data on income in two generations, so the estimated own-income effects may have had a downward bias. This article uses data with income from two generations to estimate the Easterlin model directly. Own income is still not positively significant. A simple single-equation test is developed to distinguish this model from a Becker intergenerational serially correlated endowments model that he claims is observationally equivalent. The test results favor the Becker formulation.