Teenage childbearing and the welfare state

Abstract Teenage childbearing is a common incident in developed countries. However, teenage births are much more likely in the USA than in any other industrialized country. Most of these births are delivered by female teenagers from low-income families. The hypothesis put forward here is that the welfare state (a set of redistributive institutions) has a significant influence on teenage childbearing behavior. We develop an economic theory of parental investments and the risky sexual behavior of teenagers. The model is estimated to fit stylized facts about income inequality, intergenerational mobility, and the sexual behavior of teenagers in the USA. The welfare state institutions are introduced via tax and public education expenditure functions derived from US data. In a quantitative experiment, we impose Norwegian taxes and education spending in the economic environment. The Norwegian welfare state institutions go a long way in explaining the differences in teenage birth rates between the USA and Norway.