Recent demographic literature shows in Swedish micro-level data a
positive effect of female wage income or female education on fertility.
The literature explains this finding with Swedish family policies of high
subsidies for bought-in child care and generous parental leave benefits
that are calculated on the basis of a woman's prior wage income. Both
policies would cause the substitution effect from an increase in female
wages on fertility to be dominated by its income effect. This paper
shows within an economic model that there are offsetting effects from
Swedish family policy that cause the reduction in the magnitude of
the substitution effect of female wages to be most likely rather small.
This working paper is also available at: http://ideas.repec.org/p/lbo/lbowps/2006_7.html.