Inequality and fertility rate worldwide: a cointegration and causality approach with panel data

Abstract

The objective of this research is to examine the causal link between inequality and fertilityrate in 89 countries during 1980-2016. First, we use the Pedroni (1999) and Westerlund(2007) cointegration test to find the equilibrium and the Dumitrescu and Hurlin(2012) tests to verify the direction of causality between the series. Second, we estimatethe strength of the cointegration vector for individual countries through a Dynamic OrdinaryLeast Squares (DOLS) model and for groups of countries through a Dynamic Panelwith Ordinary Least Squares (PDOLS) model. The results found indicate the existence ofa short- and long-run equilibrium between the two variables at the global level and bycountry groups. The strength of the cointegrating vector is strong in lower middle-incomecountries. Finally, the results of the causality test show that there is bidirectional causalitybetween fertility rate and inequality in high-income, lower-middle-income, low-incomeand extremely low-income countries. In the last part, the need to incorporate policies suchas the implementation of cash transfers to poor families and progressive taxation to helpreduce inequality in the affected groups of countries is discussed.