This dissertation consists of three chapters. The first chapter addresses the roles of changes in assisted reproductive technologies, returns to female experience and abortion rates in explaining the historical trend of child adoption. The second chapter assesses the effects of increased income inequality and decreased income mobility on timing of births and marriages and on the single motherhood rates. The third chapter establishes the importance of accounting for marital state in the models of indirect income uncertainty inference.
Chapter 1 aims to explain the μ-shaped historical trend of child adoption in the US by emphasizing the role of the changes in the demand side of the market for child adoption. I argue that changes on the demand side such as increasing returns to female human capital and innovations in Assisted Reproductive Technology (ART) have played a major role in shaping the historical adoption trend along with the changes in the supply side, namely, increase in the abortion rates. I present a life-cycle model, in which an agent makes a fertility-timing decision based on the returns to her human capital and age-specific probability of conception. Under the assumption that adoption is an alternative to childbearing, i.e. an agent chooses to adopt after she fails to conceive, the presented model uses historical trends of returns to human capital and success rate of ART to explain changes in adoption trends. According to the model, increasing returns to female human capital were responsible for the delay in childbearing and therefore the increase in the demand for adoption until the 1970s. After 1970, the legalization of abortion decreased the supply of orphans, while innovations in ART decreased the demand by allowing women to have biological children at later ages. Around 1980, the effect of increasing returns to human capital overturned the one of advances in ART, which resulted in a slow recovery of the adoption trend.
Chapter 2 studies the dramatic transformation that the typical American family has undergone since the 1950s. Marriage and fertility have been delayed, while single-motherhood rates have increased. The link between these facts emanates from the greater delay in marriage than that in first births. As “the Gap” between the age at first birth and the age at first marriage becomes negative for some women, out-of-wedlock first births increase. In my analyses, I focus on the increase in income inequality and the decrease in income mobility --- observed across two National Longitudinal Survey of Youth (NLSY) cohorts of women --- to account for the above facts using an equilibrium two-sided search framework in which agents make marriage and fertility choices over the life-cycle. Marriage is a commitment device for consumption-sharing, providing spouses with partial insurance against idiosyncratic earnings risk. Agents derive utility from children, but children also involve a risky commitment to future monetary and time costs. According to my model, two observed trends in the income process produce these changes in the respective timings of marriage and fertility. First, the increase in income inequality produces incentives to delay marriage. Since single women tend to face higher income risk than do married women, all else being equal, a decline in marriages when young implies delayed births, which are perceived to be risky. Second, the decrease in income mobility also delays marriage as the insurance value of marriage decreases but accelerates fertility because it becomes less risky to have a child. The model qualitatively matches the observed changes in family formation and quantitatively accounts for a significant portion of the observed changes in marriage and fertility timing between the two NLSY cohorts.
In Chapter 3 I aim to add to the indirect income uncertainty inference literature. The currently existing models used to infer earnings uncertainty from consumption decisions of individuals either use married couples as a unit of analysis or treat married individuals as singles. Income pooling and less than perfect correlation of earnings in marital unions provide spouses with marital income insurance. Not accounting for the marital insurance biases the uncertainty estimation results. In this chapter, I demonstrate some properties of the marital insurance bias in a stylized analytical model. In order to access the potential magnitude of the marital bias, I build a structural model which accounts for marital insurance. I then compare the estimation results of the model which accounts for marriage with the results of one that does not after using them on the simulated data set. In addition, I introduce a non-parametric income process in the structural model used for the indirect uncertainty inference. The main advantage of the resulting model is that, unlike the typical models in this area, it can be used on short-term panel data.