Child-raising cost and fertility from a contest perspective

We model parents’ fertility and child-raising spending decisions as a Tullock contest with budget constraints and prizes that depend on relative efforts. We show that if the consequences of failure and the intensity of competition are sufficiently high, some potential parents forego having children in the resulting equilibrium. Moreover, parents having children prefer to have only one child and allocate all of their resources to raising that child rather than have multiple children. The equilibrium is consistent with the recent East Asian fertility experience and, more broadly, shows that competitive pressure, when combined with a high degree of inequality or poor social protection, can lead to an overaccumulation of human capital and low fertility.