Unexpected Inflation and Fertility Rate in the US

This paper examines the impact of unexpected inflation on the fertility rate in the United States. Using state-level data from 2003-2023, we employ the Kalman filter to extract the unexpected component of actual inflation rates then relate this value to the next year’s total fertility rate. The empirical results show that unexpected inflation has a negative and significant impact on the total fertility rate. Younger women (under age 25) are more likely to postpone or reduce births due to an unanticipated inflation. A one percentage point increase in unexpected inflation is expected to result in 3-5 fewer births per 1,000 reproductive-age women. Not only does this work provide additional indirect evidence of the fact that children are normal goods (i.e., less is demanded at a higher price), but we are the first to document the role of unexpected inflation in delaying or preventing births within the contemporary U.S. context.

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