The Effect of Trade Liberalization on Marriage and Fertility : Evidence from Indian Districts

Using a district-level panel data constructed from four waves of decennial Indian Census covering 1981-2011, we examine the medium run (1991-2001) and long run (1991-2011) impacts of the 1991 trade liberalization in India on marriage and fertility rates among young women aged 15-34 years. We exploit the fact that the countrywide tariff reductions that varied across industries created exogenous local labor market shocks based on the initial industrial composition of the district. We find that districts that were more exposed to tariff cuts witnessed a larger increase in marriage rate, especially in urban areas, compared to districts that were less exposed to tariff cuts. Fertility rate declined in districts that were relatively more exposed to tariff reductions, with the effect mostly driven by the rural areas. On average, the trade reform had no negative impact on the employment of young men and women. While we can explain our findings on marriage rates with the help of aggregate labor market indicators which indicate no adverse effect on the workforce participation rate of young men and women, thus increasing their prospects of marriage, the decline in fertility points towards a quantity quality trade-off where families invest in the quality of children when economic prospects improve