Education, Income, and Poverty: The Long-term Impact of Abortion Allison Davido Faculty Advisor

59 Pages·2009·0.53 MB·English

Education, Income, and Poverty:
The Long-term Impact of Abortion

Allison Davido
Faculty Advisor: Dr. Martha Bailey
Economics Senior Honors Thesis
April 15, 2009

Abstract

The legalization of abortion is a controversial subject both in and out of the academic literature.
Scholars and laypeople alike have argued for each side of the debate citing better or worse outcomes
for those impacted by abortion. Economic theory clearly predicts that lowered costs of abortion
through legalization should improve the average outcomes of children. Past empirical analyses have
supported this assertion, but this analysis shows that while outcomes do improve, this improvement
may not be due to the legalization of abortion. This paper also provides alternative explanations for
the relative improvement in outcomes in states with lower costs of abortion. On the whole, these
findings question the assumption that being “wanted” around the time of conception has an impact of
later-life outcomes.

I am grateful to Dr. Martha Bailey for her outstanding mentorship, support, and advice. Without her
comments and suggestions, this paper would not have been possible. I would also like to thank Dr.
David Lam and Jessica Hoel for their invaluable comments and suggestions on earlier drafts of the
paper.
Introduction
The legalization of abortion has been a controversial issue for years. Not only are the moral
and ethical implications heavily contested, but more objective implications for welfare have also
been debated. One important question is whether abortion impacts child well-being.
The economic theory used in much of the literature implies that abortion legalization should
result in positive selection into a cohort (Gruber, Levine, & Staiger 1999; Ananat et al. 2006). This
means that the average child’s outcome is expected to be better than that of the children not born. If
the children who are expected to have worse outcomes are systematically more likely to be aborted,
the average outcomes of those children that are born should improve.
Empirical tests of this framework conclude that the introduction of legal abortion lowered
birthrates and changed which women ultimately gave birth. The birthrates for teens, women over 35,
and nonwhite women decreased more than for any other group (Levine et al. 1996). Other research
has shown that the legalization of abortion improved the living circumstances into which children
were born (Gruber, Levine, and Staiger 1999; Donohue and Levitt 2001). Their presumptions are
that women with “unwanted” children took greater advantage of the increased availability of abortion
and that these “unwanted” children, if they had been born, would have fared worse than their
“wanted” peers. But does “wantedness” around the time of conception necessarily alter the later-life
outcomes of children? Research by Ananat et al. (2006) provides evidence that abortion legalization
improved later-life outcomes such as the likelihood of graduating from college and decreased the
probability of receiving welfare.
The timing of the legalization of abortion across states provides a convenient way to test the
theory and its implications. Because five states legalized abortion in 1970 prior to Roe v. Wade, we
can compare outcomes for children born before Roe v. Wade in states with different statuses of
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abortion legality. Furthermore, we can also compare outcomes for children in different states after
the Roe decision.
This paper seeks to extend the findings of Ananat et al. using United States census data to
investigate the impact of abortion legalization on later-life outcomes. Specifically, I test an
alternative model, relaxing some of their restrictions, and provide a more flexible specification for
testing the impact of the legalization of abortion. I find little support for the Ananat et al. findings,
while the more flexible specification yields still no support for a strong impact of the legalization of
abortion on later-life outcomes. The results provide evidence of an impact of birth in a repeal state
on later-life outcomes, but the effect does not seem to be due to the legalization of abortion.
Theory
An Economic Model
Fertility decisions, like all other decisions in economics, are made by weighing costs and
benefits. There are both benefits and costs associated with abortion and giving birth.1 The costs of
abortion include the monetary cost of obtaining the abortion, in addition to the psychological costs
and other repercussions resulting from the abortion decision. Costs to giving birth include the
monetary costs of caring for the child as well as the emotional and time investment required.
Benefits of abortion include not having to raise a child that was unexpected or not desired, while the
benefits to giving birth include the love and companionship a child brings, among other things.
In the most basic scenario, a woman makes a decision about whether to get pregnant (see
figure 1). She first evaluates the expected payoff to pregnancy at the time of becoming pregnant.2
This payoff will be different for each woman. Once pregnant, she decides whether to give birth. In a
world of illegal abortion, the cost of abortion is extremely high. Although not necessarily

1 I ignore here the women for whom there is a negative cost of giving birth (i.e. they want to have a child). For
them, the abortion versus birth decision is irrelevant; they will choose to give birth in all cases, regardless of the cost
of abortion (which we assume is always positive).
2 See Levine (2004) for a comprehensive explanation of a model of the woman’s choice of the probability of
pregnancy.
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prohibitory, the high cost of an illegal abortion may deter many women from this choice. The
important thing to note, however, is that if abortion is prohibitively expensive, the pregnancy
decision is generally dictated by how the woman perceives the payoffs to giving birth before ever
becoming pregnant.
Because the cost of legal abortion is significantly less than that of illegal abortion, the
legalization of abortion makes abortion a more viable option for many women. The option of a
lower cost (and therefore, more probable) abortion allows the woman to defer the decision of
whether to give birth until further evaluating the costs and benefits of a birth. Once pregnant, the
woman continues to receive information about the payoff to giving birth; this information may make
her more or less likely to give birth. For example, if, once pregnant, the woman finds her parents are
very supportive of her decision, she may be more likely to give birth, since she will have extra
support once the baby is born. Conversely, if her partner leaves her after becoming pregnant, the
woman may be less willing to give birth, and she may consider abortion. Many other pieces of
information about the repercussions of giving birth become apparent after pregnancy, and each of
these influences the birth decision.3
Assume the payoff to birth is X.4 This value varies from woman to woman, and its value is
unknown when choosing to become pregnant. Further assume this payoff has a normal distribution
with mean, μ, and standard deviation, σ. If she does not become pregnant, a woman receives a
payoff, normalized to zero.
Once pregnant, the value of X becomes known. At this point, the woman chooses whether to
give birth and receive payoff X, or abort and receive payoff –A, where A is the (positive) cost of
abortion. This cost encompasses any and all costs associated with the act of abortion, monetary,

3 For example, information about the health of the mother or child may greatly impact the birth decision.
4 The following discussion utilizes much of the same notation as that in Ananat, et al. (2004). I change from
framing the discussion in terms of costs to terms of benefits or payoffs.
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psychological, physiological, and otherwise. In choosing between birth and abortion, the woman
wants to maximize her expected payoff.
In this simple model, we assume two costs of abortion: a cost of abortion in states where
abortion is legal, and a separate, and higher, cost in states where abortion is illegal (see figure 2).
This translates to a higher “payoff” to abortion in states where abortion is legal, compared to states
where it is illegal. Because women choose to give birth only when X > -A, only births for which the
payoff is above –A will occur. Looking at figure 2, we can see that births to the right of –AL will
occur in states with legal abortion, while births to the right of –AI will occur in states where it is
illegal. Stated differently, all births in region B will be aborted in states where abortion is illegal; in
states where abortion is legal, those in regions A and B will be aborted. The additional, higher
payoff births that are aborted in legal states will tend to raise the average payoff of the births that do
occur. Given the distribution of X, we can see that the expected payoff to a birth (the mean of the
distribution to the right of the relevant “-A” value) is higher in states where abortion is legal (see
figure 2). Assuming that higher payoff (i.e. more “wanted”) births have better outcomes, children
born in states where abortion is legal will fare better than their peers born in states where abortion is
illegal.
Theoretical Discussion
The economic theory used to frame the abortion decision makes specific predictions about
changes in child well-being with the introduction of legal abortion. Most models frame the
legalization of abortion as an issue of selection. The introduction of abortion differentially affects
the fertility and birth decisions of every woman, and this changes the “mix” of children born in a
cohort. If the average child born is better off than the child not born, we say selection is “positive”;
if the average child is worse off, selection is “negative.”
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The argument for positive selection is as follows: mothers in adverse circumstances are often
thought more likely to abort. This makes the children not born due to the legalization of abortion
systematically worse off than the average child. If positive selection is in fact the operating
mechanism, we would expect better outcomes for those born in the wake of abortion legalization (i.e.
the average child will have more education, higher income, a lower probability of living in poverty,
etc.).
Although this reasoning is most often used, it is important to note, however, that selection
need not be positive. This would occur if the women obtaining abortions were better educated or of
higher socioeconomic status; these women might be more motivated to utilize abortion once
available, because they have a higher opportunity cost of having a child and also better means of
obtaining an abortion. Thus, the children not born due to abortion availability may have had better
outcomes than the average child because more highly educated and wealthier women generally tend
to have better living conditions than less educated and poorer women. That is, negative selection
implies that those children born after abortion legalization have worse outcomes than the children not
born due to abortion legalization.
We can see that the theoretical framework presented above predicts that the legalization of
abortion should improve children’s outcomes through positive selection. Women for whom the
payoff to a birth is greater than the payoff to abortion will give birth. Facing different costs (and
therefore payoffs) of abortion, not all women face the same abortion/birth decision. Thus, the option
of legal abortion changes the “mix” of children born, theoretically improving cohort outcomes.
This model holds only so far as one critical assumption remains true: that more “wanted”
births have better outcomes. Different “payoffs” to abortion lead to different fertility decisions.
Women choose to give birth as long as the benefits of giving birth are greater than those of the
alternative (here, abortion). In states where abortion is legal, because the cost of abortion is lower,
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the “payoff” to abortion is higher. This leads women to have a higher expected payoff to a birth (see
figure 2). According to theory, because these higher payoff births are more “wanted,” they will fare
better in the long run.
Implicit in this argument is that these “wanted” children are born into circumstances
conducive to better later-life outcomes. However, many factors may interact to determine how a
child develops, beyond the degree that the child is “wanted.”
Economic theory assumes that mothers with more “wanted” births will be better able and
more willing to provide conditions that help the child throughout life. This leads their children to
have improved outcomes later in life. Yet some “unwanted” children end up doing extremely well,
while other “wanted” children do not. For example, even if a child is “unwanted,” a mother with
more resources may find herself in a better position to provide for the child; furthermore, mothers of
“unwanted” children may exhibit compensatory behaviors after birth that could make up for the fact
that the child was not initially “wanted.” Conversely, mothers of “wanted” children may find
themselves unable to adequately care for their children.
This argument challenges the basic assumption that “wanted” children (at the time of
conception) are always better off than their “unwanted” peers. If this does not hold, then the
argument underlying positive selection falls apart. If whether the child is wanted does not matter for
later life outcomes, then which women obtain abortions should not matter either. Even if certain
women are disproportionately more likely to have an abortion, as previous research has shown, the
effect on children’s outcomes may not be systematically changed. Although abortion may impact the
living circumstances into which children are born (through selection of which women utilize abortion
once legal), the later-life outcomes of these children may not be greatly impacted due to
compensatory actions on behalf of mothers. Because we cannot be sure a priori whether mothers
will compensate after birth for the “wantedness” of their children, it is then an empirical question.
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The empirical tests rest on the link between the outcomes of interest (education, wages, and
poverty and welfare status) and child well-being. Another crucial assumption of the model is that the
outcome measures are an accurate reflection of well-being. It is common in the economic literature
to use economic outcomes as a measure of opportunity, with the belief that greater opportunity leads
to improved outcomes. Living in poverty or receiving welfare is indicative of restricted
opportunities; higher wages are assumed to improve opportunities, and thus, outcomes. And given
the positive association between education and wages, more education also improves opportunities
and outcomes, as it leads to higher wages.
Literature Review and Empirical Testing of Theory
Since the national legalization of abortion in 1973, scholars have analyzed its impact on
children.5 Many different aspects have been studied, from legalization’s impact on the birth rate to
the impact on children’s living circumstances to the impact on later-life outcomes. The first two
outcomes are the most widely cited and researched, while the last has been the topic of more recent
study, including the present analysis.
The theoretical impact of changes in the cost of abortion on the birthrate is ambiguous; thus,
the impact remains an empirical question.6 Levine et al. (1996) found the legalization of abortion
lowered birthrates between five and eight percent. This indicates that legalized abortion did impact
women’s fertility decisions.
Interestingly, the impact on the birthrate varied by both age and location. The birthrate
declined significantly more for teens (13 percent), women above age 35 (eight percent), and

5 See Levine (2004) for a comprehensive overview of the research literature on this subject.
6 The number of births in a given time period is a function of the number of pregnancies and abortions. The
legalization of abortion amounts to a discrete (and large) fall in the cost of abortion; it is reasonable to assume that
as the cost of abortion falls, its use would increase. If the pregnancy rate stays the same or falls, births would
necessarily decrease. However, if women see abortion as a type of insurance, giving them the option to get pregnant
before deciding whether to abort or give birth, births may increase, as women who get pregnant may ultimately
decide to have the baby once they get more information about the birth decision. See Levine et al. (1996) and
Levine (2004) for a more thorough treatment of the theory behind the impact of changes in abortion cost on the
birthrate.
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nonwhite women (twelve percent). Furthermore, because women in states where abortion was illegal
could travel to states where it was legal, the impact on the birthrate varied by distance to a state
where abortion was legal. The birthrate in states where abortion was illegal located closest to legal
states experienced a smaller decline than those located farther away, presumably because women
nearest to legal states could travel to these states to obtain an abortion. Additionally, the
convergence in birthrates, as well as general abortion use, was slower in states farther away, further
supporting a definitive impact of legalized abortion on fertility decisions.
Using the Levine et al. results as a basis, others have analyzed the impact of legalized
abortion on the living circumstances of those not born due to abortion legalization—what this
literature refers to as the “marginal child” (Gruber, Levine, & Staiger 1999). In other words, the
“marginal child” is the child a women is just indifferent between having or not. Changes in the cost
of abortion change the parents of the “marginal child,” as abortion costs alter the trade-off between
the birth and abortion options.
Importantly, Gruber and colleagues (1999) found children born after the legalization of
abortion were 60 percent less likely to be born into single-parent families, 50 percent less likely to
live in households in poverty, 45 percent less likely to be on welfare, and 40 percent less likely to die
in infancy. That is, they found evidence that children born after abortion legalization were
“positively selected.”
Not all research, however, has been supportive of positive selection. Pop-Eleches (2005)
provides evidence from Romania of negative selection. Dictator Nicolae Ceauşescu outlawed
abortion in 1966. Pop-Eleches found that after the implementation of the ban, the children born had
higher educational attainment and better labor market outcomes.7 He contends this occurred because

7 Note that this is the reverse of the situation in the United States. In the United States, the abortion ban was lifted;
negative selection therefore implies that legalization would cause outcomes to deteriorate.
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wealthier and more educated Romanian women were more likely to obtain abortions when they were
legal and were, therefore, forced to give birth in the absence of legal abortion.
Although the results from Gruber and colleagues (1999) provide compelling evidence of
positive selection resulting from abortion legalization, they do not, however, speak to outcomes for
the children specifically. They demonstrate how the circumstances in which children are raised
changed in the wake of abortion legalization.8
Donohue and Levitt (2001) also argue for positive selection. They provide evidence that the
legalization of abortion (and subsequent increase in its use) reduced crime rates approximately 18 to
20 years later. According to the model of positive selection, the legalization of abortion caused
women in adverse conditions to disproportionately abort their children. Donohue and Levitt claim
these children would have been more likely to commit crimes in their late adolescent and early adult
years.9 As evidence, Donohue and Levitt show that the states that legalized abortion prior to Roe v.
Wade experienced significant decreases in crime before the rest of the country. They argue that
legalized abortion can explain nearly half of the decrease in crime in the 1990s. However, other
researchers have critiqued their findings, citing methodological flaws (Joyce 2004a and 2004b).
Donohue and Levitt (2004), in turn, have responded. Although this paper will not expand on the
debate, aspects of it centered on whether the abortion rate in a state accurately measures the variation
in unwanted births (Ananat et al. 2006).
Ananat et al. (2006) extend the abortion analysis and examine how abortion legalization
changed later-life outcomes of the “marginal child.” They found significant effects of the
legalization of abortion on later-life outcomes such as educational attainment and poverty status.
Specifically, some of the estimates show the “marginal birth” 23 to 69 percent more likely to be a

8 Pop-Eleches (2005) analyzes educational attainment and labor market outcomes, both later-life outcomes of
interest; however, as discussed below, the results may not translate to a United States context.
9 Note also that reduced cohort sizes due to the increased use of abortion could also account for some of the decrease
in crime; however, the evidence presented by Donohue and Levitt strongly indicates that lower per capita crime
rates among those born after legalization account for much of the decline in crime.
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