Social Surrogacy: Market Design and Implications for Fertility

We investigate theoretically the introduction of a market for commercial surrogacy for social motives. Agents have heterogeneous incomes and preferences for parenthood, and face pregnancy-related income reductions. In equilibrium, lowincome agents provide surrogacy for high-income agents who seek “insurance” against income loss and would not become parents without surrogacy. Surrogacy has an ambiguous effect on fertility: it increases fertility only if the latter is low without surrogacy. Otherwise, its impact on fertility is negative.