This paper presents a dynamic model of fertility decisions in which children serve as an incomplete insurance good. The model incorporates uncertainty about future income and the survival of children as well as a discrete representation of the number of children. It contributes to the understanding of the negative relation between fertility and education, shows why parents may demand children even if the return is negative, and explains why fertility might rise with increasing income when income is low and decrease when income is high. Furthermore, the model can account for the decline in fertility when the risk of infant and child mortality decreases. Finally, the implications for empirical tests of the demand for children are also examined.
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Find related papers by JEL classification: J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
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