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  • Policy Research Working Paper 6930

    Comparative Advantage, International Trade, and Fertility

    Quy-Toan Do Andrei Levchenko Claudio Raddatz

    The World Bank Development Research Group Macroeconomics and Growth Team June 2014

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  • Produced by the Research Support Team

    Abstract

    The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

    Policy Research Working Paper 6930

    This paper analyzes theoretically and empirically the impact of comparative advantage in international trade on fertility. It builds a model in which industries differ in the extent to which they use female relative to male labor and countries are characterized by Ricardian comparative advantage in either female labor or male labor intensive goods. The main prediction of the model is that countries with comparative advantage in female labor

    This paper is a product of the Macroeconomics and Growth Team, Development Research Group. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authors may be contacted at qdo@worldbank.org, alev@umich.edu, or craddatz@bcentral.cl.

    intensive goods are characterized by lower fertility. This is because female wages and therefore the opportunity cost of children are higher in those countries. The paper demonstrates empirically that countries with comparative advantage in industries employing primarily women exhibit lower fertility. The analysis uses a geography-based instrument for trade patterns to isolate the causal effect of comparative advantage on fertility.

  • Comparative Advantage, International Trade, and

    Fertility

    Quy-Toan Do

    The World Bank

    Andrei A. Levchenko

    University of Michigan

    NBER and CEPR

    Claudio Raddatz

    Central Bank of Chile

    Keywords: Fertility, trade integration, comparative advantage.

    JEL Codes: F16, J13, O11.

    ⇤We are grateful to Raj Arunachalam, Martha Bailey, Francesco Caselli, Francisco Ferreira, Elisa Gam- beroni, Gene Grossman, David Lam, Carolina Sanchez-Paramo, and seminar participants at various insti- tutions for helpful suggestions. Çağatay Bircan, Aaron Flaaen, Dimitrije Ruzic, and Nitya Pandalai Nayar provided outstanding research assistance. The project has been funded in part by the World Bank’s Research Support Budget. The views expressed in the paper are those of the authors and need not represent either the views of the World Bank, its Executive Directors or the countries they represent, or those of the Central Bank of Chile or the members of its board. This document is an output from a project funded by the UK Department for International Development (DFID) and the Institute for the Study of Labor (IZA) for the benefit of developing countries. The views expressed are not necessarily those of DFID or IZA. Email: qdo@worldbank.org, alev@umich.edu, craddatz@bcentral.cl.

  • 1 Introduction

    Attempts to understand population growth and the determinants of fertility date as far back

    as Thomas Malthus. Postulating that fertility decisions are influenced by women’s oppor-

    tunity cost of time (Becker, 1960), choice over fertility has been incorporated into growth

    models in order to understand the joint behavior of population and economic development

    throughout history (see e.g. Barro and Becker 1989; Becker et al. 1990; Kremer 1993; Galor

    and Weil 1996, 2000; Greenwood and Seshadri 2002; Doepke 2004; Doepke et al. 2007; Jones

    and Tertilt 2008). The large majority of existing analyses examine individual countries in a

    closed-economy setting. However, in an era of ever-increasing integration of world markets,

    the role of globalization in determining fertility can no longer be ignored.

    This paper studies both theoretically and empirically the impact of comparative advan-

    tage in international trade on fertility outcomes. Our conceptual framework is based on

    three assumptions. First, goods di↵er in the intensity of female labor: some industries em-

    ploy primarily women, others primarily men. This assumption is standard in theories of

    gender and the labor market Galor and Weil (1996); Black and Juhn (2000); Qian (2008);

    Black and Spitz-Oener (2010); Rendall (2010); Pitt et al. (2012); Alesina et al. (2013), and

    as we show below finds ample support in the data. In the rest of the paper, we refer to goods

    that employ primarily (fe)male labor as the (fe)male-intensive goods. Second, women bear a

    disproportionate burden of raising children. That is, a child reduces a woman’s labor market

    supply more than a man’s. This assumption is also well-accepted (Becker, 1981, 1985; Galor

    and Weil, 2000), and is consistent with a great deal of empirical evidence (see, e.g., Angrist

    and Evans, 1998; Guryan et al., 2008). Finally, di↵erences in technologies and resource en-

    dowments imply that some countries have a comparative advantage in the female-intensive

    goods, and others in the male-intensive goods. Our paper is the first to both provide em-

    pirical evidence that countries indeed di↵er in the gender composition of their comparative

    advantage, and to explore the impact of comparative advantage in international trade on

    fertility in a broad sample of countries.

    The main theoretical result is that countries with comparative advantage in female-

    intensive goods exhibit lower fertility. The result thus combines Becker’s hypothesis that

    fertility is a↵ected by women’s opportunity cost of time with the insight that this opportu-

    nity cost is higher in countries with a comparative advantage in female-intensive industries.

    We then provide empirical evidence for the main prediction of the model using industry-

    level export data for 61 manufacturing sectors in 145 developed and developing countries

    over 5 decades. We use sector-level data on the share of female workers in total employment

    to classify sectors as female- and male- intensive. The variation across sectors in the share

    1

  • of female workers is substantial: it ranges from 8-9 percent in industries such as heavy

    machinery to 60-70 percent in some types of textiles and apparel. We then combine this

    industry-level information with data on countries’ export shares to construct, for each country

    and time period, a measure of its female labor needs of exports that captures the degree to

    which a country’s comparative advantage is in female-intensive sectors. We use this measure

    to test the main prediction of the model: fertility is lower in countries with a comparative

    advantage in female-intensive sectors.

    The key aspect of the empirical strategy is how it deals with the reverse causality prob-

    lem. After all, it could be that countries where fertility is lower for other reasons export

    more in female-intensive sectors. To address this issue, we follow Do and Levchenko (2007)

    and construct an instrument for each country’s trade pattern based on geography and a

    gravity-like specification. Exogenous geographical characteristics such as bilateral distance

    or common border have long been known to a↵ect bilateral trade flows. The influential

    insight of Frankel and Romer (1999) is that those exogenous characteristics and the strong

    explanatory power of the gravity relationship can be used to build an instrument for the

    overall trade openness at the country level. Do and Levchenko (2007)’s point of departure

    is that the gravity coe�cients on the same exogenous geographical characteristics such as

    distance also vary across industries – a feature of the data long known in the international

    trade literature. This variation in industries’ sensitivity to the common geographical vari-

    ables allows us to construct an instrument for trade patterns rather than the overall trade

    volumes. Appendix B describes the