Family planning in a life-cycle model with income risk

Summary

Several US states have recently restricted the access to abortions. We study fertility intentions and how family planning and abortions are used as mechanisms to control fertility among couples facing income risk. We formulate and estimate a life‐cycle consumption‐saving model with uninsurable income risk and imperfect contraceptive control that matches fertility behavior in the British Household Panel Survey (BHPS) well. We use the estimated model to investigate how family planning and abortions are used to control fertility in our model. Our simulations suggest that income risk affects family planning and that abortion is used to control fertility due to the presence of income risk. This indicates that the availability of abortions might play a role as an insurance mechanism.