The effect of being born in a crisis

This month, Germany and the rest of Europe celebrate the 25th anniversary of the fall of the Berlin Wall, perhaps the most symbolic moment of the collapse of the communist regimes in Eastern Europe. This event had colossal repercussions for the economic development of the region but also, and maybe less obviously, on its demography. Following the collapse of the Communist regimes, fertility in Eastern Europe went into a sharp decline (United Nations Economic Commission for Europe 2000). This was especially marked in East Germany where there was a 50% drop in fertility over a very short period (see Figure 1), which has been described by demographers as the “most substantial fall in birth rates that ever occurred in peacetime” (Conrad et al. 1996).

Figure 1. Annual crude birth rate per 1,000 women, 1950–2008

Note: Calculations based on administrative population data from the Federal Institute for Population Research (http://www.bib-demografie.de)

Economic uncertainty was one of the main reasons for the fertility drop. Which kind of parents decide to still have children in such distressing economic times, and does this parental selection matter in terms of the cohort’s outcomes? Theoretically, an economic downturn has two opposite effects on the demand for children: it reduces household income (income effect), but it also reduces the opportunity costs of having children (substitution effect).

Which effect dominates is a priori ambiguous, but since fertility is procyclical, the income effect appears to dominate overall. In fact, it is likely that the relative size of the substitution and income effects depends on family characteristics, leading to differences in parental composition throughout the economic cycle. Indeed, Dehejia and Lleras-Muney (2004) show that in the US, white mothers giving birth when unemployment is higher are less educated, resulting in worse health outcomes at birth.

The fall of the Wall as a natural experiment

The fall of the Berlin Wall provides a unique ‘natural experiment’ to study this question. In a recent study, we define the cohort of children born in East Germany between August 1990 (conceived just after the collapse of the wall) and December 1993 as the ‘Children of the Wall’ (Chevalier and Marie 2013). We provide evidence on parental selection based on i) the average criminal activity of the Children of the Wall as they grew up, ii) their educational attainment, and iii) detailed individual-level data, on both mother and child, regarding parental skills.

Using state-level statistics on contact with the police by age group over the period 1993–2011, we find that the Children of the Wall exhibit arrest rates at least 40% higher when compared with older cohorts and to their West German peers. This is true for all crime types and for both boys and girls. Importantly, these differences in the frequency of contact with the police start appearing as early as age 6 (Figure 2). This is despite being part of a numerically smaller cohort, which is usually associated with positive outcomes and is indicative of a strong negative parental selection.

Figure 2. Arrest rate per 1,000 population in East and West Germany by selected age group

(a) Age group 6–7

(b) Age group 10–11

(c) Age group 16–17

Notes: Authors’ own calculation from administrative arrest data by two-year age groups at the Land level provided by the Federal Criminal Police Office (www.bka.de). Vertical red lines indicate the Children of the Wall cohort.

Similarly, the Children of the Wall have worse educational outcomes. Compared with their class peers who were conceived just before the Wall fell, they have lower test scores in PIRLS (age 11–12) and PISA (age 15–16) and are over-represented among low achievers. As such, they are 33% more likely to have repeated a grade by age 12 and 9% more likely to have been put into a lower educational track.

The effect of parental characteristics

To explore if these negative outcomes are driven by negative parental characteristics, we make use of very detailed survey data from the German Socio Economic Panel (SOEP) and the Deutsches JungedInstitut survey (DJI). Women who gave birth in East Germany just after the end of the communist regime were on average younger, less educated, less likely to be in a relationship, and less economically active.

Importantly, they also provided less educational input to their children even if they were not poorer. The Children of the Wall also rated their relationships with their mothers and the quality of parental support they received by age 17 much less favourably than their peers. Both these children and their mothers were also far more risky individuals compared with individuals who did not give birth (or were not born) in East Germany between August 1990 and December 1993.

While these results are in line with negative parental selection, they could also be driven by timing-of-birth effects. Due to the economic turmoil prevalent at the time, these children may have experienced higher levels of maternal stress in utero and during early childhood, which may have shaped their future behaviour.

To assess this hypothesis, we examine the same set of outcomes for the older siblings of the Children of the Wall who were born in the non-uncertain times of East German communism. They also similarly report having a poor relationship with their mothers, lower educational attainment, and are more risk-taking individuals. We thus reject the possibility that the Children of the Wall have worse outcomes due to being born in ‘bad times’ and instead conclude that the negative outcomes observed for this cohort can be explained by the lower average parenting skills of those who decided to have children during a period of high economic uncertainty.

A possible reason for this negative parental selection is that the fertility decision of these women did not react as strongly to changes in the economic environment. Indeed, further analysis of the SOEP reveals that less educated mothers were far less likely than more educated ones to reduce their fertility when they perceived a bad economic environment (Figure 3).

Figure 3. Economic uncertainty and fertility decisions: Probability of having a child by economic worry and education level

Notes: The graph plots the estimated probability of having a child in the period 1991–1993 separately for individuals reported to be very worried about the economy (‘very’ = 1 and ‘somewhat’/‘never’ = 0) or not, by years of education for all women aged 17 to 47 surveyed in SOEP during this period. The probit model that generates these coefficients also includes education, age, and year dummies. The grey area represents the 95% confidence intervals.

Concluding remarks

Our findings confirm that parental selection may be one of the best predictors of the future outcomes of a cohort, and that this most likely works through quality of parenting. These conclusions have potentially important policy implications. First, provision of public services should not only be based only on the size of an incoming cohort, and more attention should be paid to its composition. Second, interventions need to start from a very young age, and targeting could probably be improved by more commonly including non-cognitive characteristics such as the risk attitudes of expecting mothers or children.

References

Chevalier, A and A Marie (2014), “Economic Uncertainty, Parental Selection, and the Criminal Activity of the ‘Children of the Wall’’, LSE Centre for Economic Performance Discussion Paper 1256.

Conrad C, M Lechner and W Werner (1996), “East German Fertility after Unification: Crisis or Adaptation?”, Population and Development Review 22: 331–358.

Dehejia, R and A Lleras-Muney (2004), “Booms, Busts and Babies’ Health”, Quarterly Journal of Economics 119: 1091–1130.

United Nations Economic Commission for Europe (2000), “Fertility Decline in the Transition Economics, 1989–1998: Economic and Social Factors Revisited”, Economic Survey of Europe 1: 189–207.