How do epidemics induce behavioral changes?

This paper develops a theory of optimal fertility behavior under mortality shocks. In a 3- periods OLG model, young adults determine their optimal fertility, labor supply and life-cycle consumption with both exogenous child and adult mortality risks. For fixed prices (real wages and interest rate), it is shown that both child and adult one-period mortality shocks raise fertility due to insurance and life-cycle mechanisms respectively. In general equilibrium, adult mortality shocks give rise to price effects (notably through rising wages) lowering fertility, in contrast to child mortality shocks. We complement our theory with an empirical analysis on a sample of 39 Sub-Saharan African countries over the 1980-2004 period, checking for the overall effects of the adult and child mortality channels on optimal fertility behavior. We find child mortality to exert a robust, positive impact on fertility, whereas the reverse is true for adult mortality. We further find this negative effect on fertility of a rise in adult mortality to dominate in the long-term the positive effect on demand for children resulting from an increase in child mortality.