Birth Quake: The Baby Boom and Its Aftershocks.

• Author: Berger, Mark C.
• Position: Book Reviews - Birth Quake: The Baby Boom and Its Aftershocks - Book Review

By Diane J. Macunovich.

Chicago: University of Chicago Press, 2002. Pp. xiii, 314. $37.50.

Diane Macunovich has written a book in which she takes the Easterlin "relative income hypothesis" and confidently updates it and extends it as far as logic will allow. Sometimes a student's zeal for an idea exceeds that of her mentor. Such may be the case here. This book attempts to breathe new life into Easterlin's hypothesis after it has been virtually ignored by the economics profession for almost 20 years.

The Easterlin relative income hypothesis roughly states that an individual forms his (the theory focuses on males) expectations regarding his future income in his teenage or young adult years by looking at the income level of his parents. (1) As he goes through life, he adjusts his behavior to try to compensate for shortfalls in his income relative to his expected income. The post--World War II baby boom is an example of an exogenous shock that could set off a whole series of behavioral changes. Easterlin originally looked at fertility effects. The members of the baby boom cohort were confronted with lower income prospects than they expected from looking at their parents, and reduced their fertility to compensate for their lower than expected standard of living. Macunovich has pushed the envelope further by considering the effects of cohort size and relative income on outcomes such as marriage, divorce, unemployment, female labor force participation, college enrollment, aggregate demand, and macroeconomic var iables such as inflation and gross domestic product (GDP) growth.

Macunovich argues that the Easterlin framework fell into disfavor in the 1980s when the declining cohort sizes of the "baby bust" were confronted with continuing deterioration of earnings, opposite what one would expect from a decrease in cohort size. As one who abandoned most of my research using cohort size models in the 1980s, I have a slightly different take on what happened. It was not that cohort size (supply side) effects were not present in the 1980s; it is that changes in labor market demand swamped the supply side forces in explaining changes in the wage structure in the 1980s.

Another part of the problem of lack of interest in the work of Macunovich and Easterlin is that it lies at the confluence of economics, sociology, and demography. Easterlin has been a giant in economic demography, and I have heard him called sociologists' favorite economist. But many...