Testing the U-Shaped Relationship Between Fertility and Female Labor Force Participation: Cross-Country Analysis in recent decades

This analysis examines the relationship between fertility and female labor force participation rate using cross-country data for 178 countries in 2021 obtained from the World Bank. The regression model includes the female labor force participation (FLFP) and female tertiary education as explanatory key variables that account for women’s economic activity and access to education. Initial results indicate that relationship between female labor force participation and fertility behavior is not well captured by the linearly specified model. Therefore, to capture the potential non-linearity, the quadratic term of female labor force participation rate was incorporated to the model. This method allowed for the testing of a U-shaped pattern between female participation and the reproductive behavior across the world countries. The empirical results provide partial support for this hypothesis. Findings reveal that fertility initially declines as female labor force participation increases but begins to rise beyond a turning point of approximately 46.6%. This result suggests that negative relationship between the employment and fertility behavior is not constant across all rates of participation. However, the high heterogeneity across countries in the sample motivated the application of subsampling methods. Countries were divided into several regions, as well as into the several Human Development Index (HDI) categories, and separate models were estimated for each subsample. These subsampling results reveal that U-shaped pattern is not universal and is more evident among the highly developed countries, whereas low and the middle HDI countries do not show any strong evidence of a U-shape. Similarly, among the introduced regional groups, only Eastern Europe & Central Asia (EECA), as well as the Asia & Pacific regions exhibited the strong U-shaped pattern while other regions displayed the statistically insignificant results in terms of the presence of non-linear relationship. Overall, findings reveal that fertility-female labor force participation relationship has a context- dependent nature and is influenced by the level of the development the countries exhibit. These results highlight the importance of considering the development level and the regional differences in global cross-country analyses in explaining the demographic indicators.