In “Will the Housing Bust Produce a Baby Bust” from the Economist blog, S.J. references a research paper by Lisa Dettling and Melissa Kearney that suggests a correlation between housing prices and birth rates. The authors had hypothesized that an increase in housing prices would have a positive correlation to the birth rates of home owners as they see their “wealth” grow. There will also be a negative correlation for those who rent or are first-time buyers, but interestingly, this did not deter the majority from having their first child. The reason for these results is that children can be considered a “normal good” (for economic purposes, not in actuality), and the income effect will encourage more births.
These findings interest me as it may be a new way of understanding the socioeconomic tensions present in some countries around the world. Living in an area of high housing prices such as Vancouver, this may put strain on the public school system and our health care system, considering these findings are valid. However, it is also important to consider the make-up of the population who owns the houses as well as those who don’t, as the price hike may have more of a negative impact on birth rates than a positive one.
