Using individual-level data from the United States and a number of other developed countries, we
empirically investigate the role of income inequality in determining rates of early, non-marital childbearing
among low socioeconomic status (SES) women. We present robust evidence that low SES women
are more likely to give birth at a young age and outside of marriage when they live in more unequal
places, all else held constant. Our results suggest that inequality itself, as opposed to other correlated
geographic factors, drives this relationship. We calculate that differences in the level of inequality
are able to explain a sizeable share of the geographic variation in teen fertility rates both across U.S.
states and across developed countries. We propose a model of economic “despair” that facilitates the
interpretation of our results. It reinterprets the sociological and ethnographic literature that emphasizes
the role of economic marginalization and hopelessness into a parsimonious framework that captures
the concept of “despair” with an individual’s perception of economic success. Our empirical results
are consistent with the idea that income inequality heightens a sense of economic despair among those
at the bottom of the distribution.