THE ECONOMICS OF THE PILL Martha J Bailey

THE ECONOMICS OF "THE PILL" Martha J. Bailey Department of Economics, University of Michigan and National Bureau of Economic Research

This Talk Reflections on the 20 th Century How has women’s work and childbearing changed? Big question: Why has women’s work and childbearing changed? Quantify the Role of the Birth Control Pill Demography 275, February 2011 2

Reflections on the 20 th Century “the Female Century” Economist, September 1999 “the demographic century” Joseph Chamie, 2003 Director Population Division of the UN Dept. of Economic & Social Affairs Demography 275, February 2011 3

The Female Century 1. Big changes in the number of women working for pay 2. Big changes in the age of women participating in the paid labor force 3. Big changes in the proportion of women graduating from college (and majors & occupations they choose) 4. Big changes in women’s pay Demography 275, February 2011 4

Women’s Labor-Force Participation Source: 1890 -1940, Goldin (1990: 17); 1940 -1960 IPUMS, Ruggles and Sobek (1997) ; 1963 -2001 March CPS, Unicon (2001) Demography 275, February 2011 5

Women’s Labor-Force Participation, Selected Countries, 1960 -2000 Demography 275, February 2011 6

Women’s labor force participation, by birth cohort and age 1970 1960 1955 1930 1950 1920 1940 1900 Demography 275, February 2011 7

Ratio of Median Earnings of Women to Men Source: Goldin (2006). Plots the median female-male earnings ratio for full-time year round civilian workers. Demography 275, February 2011 8

The Demographic Century Big changes in the number of children women have 2. Big changes in certainty and timing of childbirth 1. Demography 275, February 2011 9

General Fertility Rate, United States 1895 -1980 Source: Historical Statistics Demography 275, February 2011 10

Distribution of Children Ever Born 1949 1910 1920 1940 1930 Demography 275, February 2011 11

What We Know about Why? Fundamental changes in women’s work and childbearing outcomes Harder to say why things changes occurred Demography 275, February 2011 12

Debate about the Answers � Industrial changes increased “demand” for women in market work ○ Clerical work, manufacturing during WWII, demand for teachers, microcomputer revolution � Home production increased “supply” of women to market work ○ Household: Indoor plumbing, electrification and household appliances ○ Birth regulation: Childbearing becomes deliberate � Institutional changes affected labor supply and demand ○ Changing norms, discrimination, and regulation Demography 275, February 2011 13

Do the Answers Matter? Empowerment of women Equity based arguments Expands the talent pool directly Associated with education and health of children, reductions in poverty, and longerterm economic development But how to do it? Stimulating certain sectors, regulating labor markets Subsidizing home appliances, family planning Demography 275, February 2011 14

Quantifying the Importance of “the Pill” Enovid approved as the first oral contraceptive in 1960 and was “wildly popular” Isolating its role difficult in the 1960 s is difficult Demography 275, February 2011 15

General Fertility Rate, 1910 -1980 Enovid approved for the regulation of menses 1957 Demography 275, February 2011 1960 Enovid approved for long-term use as contraceptive 16

Second Wave Feminism and Cultural Changes Demography 275, February 2011 17

How Important Was the Pill? “The ‘contraceptive revolution’ … ushered in by the pill has probably not been a major cause of the sharp drop in fertility in recent decades” ~Gary Becker “The impact of the Pill is overrated. ” ~Gloria Steinem Demography 275, February 2011 18

How Important Was the Pill? “There is a straight line between the Pill and the changes in family structure we see now… 22% of women earning more than their husbands. In 1970, 70% of women with children under 6 were at home; 30% worked—now that’s roughly reversed. ” ~Terry O’Neill, National Organization for Women Demography 275, February 2011 19

Two Studies of the Pill #1 The Pill’s Effect on Marital Fertility (AER, 2010) #2 The Pill’s Effect on the Careers of Young Women (QJE 2006, 2009 joint with Brad Hershbein and Amalia Miller 2010) Demography 275, February 2011 20

A Little Economics max U(Z, N) s. t. p. N+Z M Assumptions: (1) averting births costless (2) choice of births occurs with certainty Demography 275, February 2011 21

Modified Set-Up Let N=NN – A where NN : “natural fertility” and A: averted births max U(Z, NN – A) s. t. p(NN – A) + Z + C(A) M Demography 275, February 2011 22

Marginal Benefit of Averting Births Expected Births Averted 0 1 2 3 4 5 6 7 8 8 7 6 5 4 3 2 1 0 Expected Fertility Demography 275, February 2011 23

Adding Marginal Costs Zero marginal cost of averting births 0 1 2 3 4 5 6 8 7 6 5 4 3 2 8 Births Averted 7 Expected 1 0 Expected Fertility Demography 275, February 2011 24

Adding Marginal Costs Positive marginal cost of averting births 0 1 2 3 4 5 6 8 7 6 5 4 3 2 8 Births Averted 7 Expected 1 0 Expected Fertility Demography 275, February 2011 25

The “Pill” Affects Supply of Births 1. Lowers the marginal cost of averting births Ø Decreases price of child quality (w. r. t. quantity) Ø Taken separate from time of intimacy (reduces behavioral costs, psychic costs; eliminates bargaining and coordinating) 2. Reduces uncertainty surrounding terminal number and timing Demography 275, February 2011 26

Marginal Benefit Positive marginal cost of averting births Marginal cost of averting births with the Pill 0 1 2 3 4 5 6 8 7 6 5 4 3 2 8 Births Averted 7 Expected 1 0 Expected Fertility Demography 275, February 2011 27

#1 The Pill and Marital Fertility 1873: Federal Comstock Act passed 1960: 33 states had Comstock laws surviving; 25 sales bans; 11 had sales bans without physician exceptions Estelle Griswold Executive Director of Planned Parenthood League of Connecticut 1965: US. Supreme Court decision Griswold enjoins Connecticut’s statute—states across the nation revised their statutes Demography 275, February 2011 28

Empirical Strategy 1. Claim: � Different language of Comstock laws imply different marginal costs of using the Pill within year 2. Test of how much Pill matters: � Examine how contraceptive use and birth rates changed in places with sales bans Demography 275, February 2011 29

Empirical Test 1965 Griswold decision 1900 1957 FDA approves Enovid Comstock Laws enacted Laws relatively ineffective preventing sales/use of contraceptives Demography 275, February 2011 30

Empirical Test 1965 Griswold decision 1900 1957 FDA approves Enovid Comstock Laws enacted Laws interact with Pill technology : 1. Doctors reluctant to prescribe it/pharmacists to supply illegally 2. Black market unlikely to function 3. Marginal cost falls differentially in states without sales bans Demography 275, February 2011 31

Empirical Test 1965 Griswold decision 1900 1957 FDA approves Enovid 1970 Comstock Laws enacted States repeal or revise laws and prices converge Demography 275, February 2011 32

Ever Used Oral Contraception (Comstock Sales Ban-No Restriction) Demography 275, February 2011 33

Changes in Observables? Not really Geography Age Race Religion Education Ideal number of children Regressions that adjust for these differences imply lower use in states with sales bans of 25 % Demography 275, February 2011 34

Changes in Unobservables? Differences in attitudes or reporting? Differences in 1955 use or attitudes about contraception? No Differences in 1965 use of other contraceptives (accounts for reporting)? No Differences in 1970 use of Pill or other contraceptives (after bans disappear)? No Differences in price due to legal regime Demography 275, February 2011 35

Sales Bans and Birth Rates 1957: FDA approves Enovid 1965: Griswold Relative to states in same census region ≈ 7 births/1000 Demography 275, February 2011 36

The Big Picture ≈18/30 births =0. 60 Demography 275, February 2011 37

#2: The Pill and Young Women’s Careers 1. In 1960, married women had already made their career and family decisions without the Pill 2. How did young women’s decisions about family and career change once they knew they had control of childbearing? Demography 275, February 2011 38

Women’s Labor Force Participation, by cohort and age 1970 1960 1955 1930 1950 1940 1920 1900 Demography 275, February 2011 39

Natural Experiment in “Early Legal Access” (ELA) to Pill Legal age of majority Today: 18 1960: 21 Changes in the legal age, 1960 to 1976 Within-cohort variation in access to the Pill at age 18 Demography 275, February 2011 40

Random Assignment of ELA “Early legal access” Treatment group Comparison group Legal access to Pill at age 18 or marriage Legal access to Pill at age 21 18 21 Demography 275, February 2011 Age 41

Empirical Strategy a: ages broken into 5 -year groups, g. s: state of residence at age 21 c: birth cohorts 1943 -1953 OLS for continuous DVs Probits for binary DVs (APEs reported) Fixed effects for state, cohort, age group Standard errors clustered at state-level

Baseline characteristics cov(ELA, ) 0 ELA cov(ELA, Pill|Z)>0 cov(ELA, ) 0 Subsequent “treatments” like abortion Women’s decisions: 1. Marriage timing and first birth timing 2. Expectations about work 3. Investments in career 4. Wages

Testing Identifying Assumptions Valid strategy? Is ELA correlated with the error? ○ Baseline assignment not conditionally random?

Random Assignment? Demography 275, February 2011 45

Women’s Career Investments Demography 275, February 2011 46

Women’s Work for Pay Demography 275, February 2011 47

Women’s Lifetime Earnings Demography 275, February 2011 48

Quantitative Conclusions Innovations in birth control sped change in the post-1960 period Timing of changes in work and childbearing relate closely to the diffusion of the Pill Evidence from “natural experiments” shows that the Pill reduced childbearing and boosted young women’s career investment Demography 275, February 2011 49

Broader Conclusions Welfare effects Economic empowerment of women Panacea? Effects on children? But, the Pill was not the only thing The “demand” curve Pill was a tool that allowed women to capitalize on the growing opportunities One part of the larger story of the 20 th century Demography 275, February 2011 50