Scandinavian Working Papers in Economics

Working Papers,
University of Aarhus, Aarhus School of Business, Department of Economics

No 03-11: Poverty and Fertility - An Instrumental Variables Analysis on Indian Micro Data

Nabanita Datta Gupta () and Amaresh Dubey
Additional contact information
Nabanita Datta Gupta: Department of Economics, Aarhus School of Business, Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Amaresh Dubey: Department of Economics, Aarhus School of Business, Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark

Abstract: The gender of the first two children is used as a natural experiment to estimate the causal effect of fertility on poverty of rural nucleus households in India. In India, male children are viewed as a better source of insurance and support to the family in old age. Thus, having two girls can proxy an exogenous increase in fertility. Using household micro data from the 1993-94 Indian Quinquennial Survey (5th wave), estimation results indicate that fertility significantly positively affects poverty, but that the effect is halved when endogeneity is allowed for. Also, declining fertility accounts for almost a third of the poverty reduction in rural India between 1987/88 and 1993/1994.

Keywords: Poverty; Fertility; Endogeneity; Natural experiment; Instrumental variables

JEL-codes: J13; O12

50 pages, November 1, 2003

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