Early childbearing and the option to postpone

Abstract

This paper uses the option value theory to analyse whether there exists a value in postponing childbearing for a young woman. The main insights are based on the idea that the costs of bearing tend to decrease with time and, in addition, are subject to uncertainty. Both factors create a value of waiting until a certain critical cost or threshold is reached. We make the analysis for different types of women according to their socioeconomic (income) characteristic. We find important differences in the value of postponing for different types, and show the relevance of considering the option to postpone when deciding to bear the first child. This analysis suggests that, as long as the possibilities of poorer woman to reach high schooling achievements increase, the will optimally choose an older age to begin childbearing. In other words, early childbearing by impoverished women might be seen as a rational reaction to their disadvantaged situation, where opportunities to reach high achievements are low, independently of the presence of a child.