Fertility and output in Europe: new evidence from panel cointegration analysis

The paper studies the relationship among per capita output, real wage and demographic variables, such as fertility rate and age dependency ratio in eight European countries over the period 1960-98. In the empirical analysis, stationarity and non-cointegration is tested employing country-by-country and panel tests. The results show that in a country-by-country basis and in the panel setting, there is a long-run relationship among the four variables. Employing the fully modified OLS estimation technique, the long-run coefficients are estimated for each country separately and for the panel as a whole. The results indicate that in the long run, an increase in real output per capita will be associated with higher fertility while positive employment shocks are responsible for the deterioration of fertility. In addition, the findings suggest that in the sample of the eight European countries, an increase in fertility will be associated with higher real per capita output.