The worsening record on teenage pregnancies of both Britain and the USA relative to other countries motivates a continued interest in estimating the long-term socioeconomic consequences of teenage motherhood. UK teenage birth rates are the highest in Western Europe and yet are still significantly less than in the USA. Britain is the only country in Western Europe which has not experienced a significant decline in teenage fertility rates in the last thirty years.

The question of whether early motherhood is an indicator of prior disadvantage, a pathway to future disadvantage, or both, is one that has been extensively debated in recent literature. This question has important policy implications for the nature, timing and targeting of interventions to assist young mothers. It has also challenged researchers to find appropriate econometric techniques to distinguish between these conflicting stories.

This paper is concerned with estimating the effects of early motherhood for a cohort of British women born in 1970, calculating how much of the well-documented association of early motherhood and negative later-life economic outcomes can be given a causal interpretation. In addition we explore the extent to which the state insures teenagers against any economic loss associated with early motherhood through income transfers later in life.