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Children, Happiness and Taxation

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Author Info

  • Leonardo Becchetti
  • Elena Giachin Ricca
  • Alessandra Pelloni

Abstract

Empirical analyses on the determinants of life satisfaction often include the impact of the number of children variable among controls without fully discriminating between its two (socio-relational and pecuniary) components. In our empirical analysis on the German Socioeconomic Panel we show that, when introducing household income without correction for the number of members, the pecuniary effect prevails and the sign is negative while, when we equivalise income with the most commonly adopted equivalence scales, the non pecuniary (socio-relational) effect emerges and the impact of the variable is positive and significant above a minimal scale elasticity threshold. We further reject slope homogeneity and show that the positive relational effect is stronger for males, below median income households and East Germans. We interpret these subsample split results as driven by heterogeneous opportunity costs. Our empirical results give rise to a paradox: why people have children if the overall (pecuniary plus relational) effect on life satisfaction is negative? We provide in the paper some interpretations consistent with our findings. Some of them are based on motivational complexity. This implies that demographic policies and the paradox are strictly connected. Effectiveness of tax/subsidies impacting on fertility crucially depends on whether the children paradox may be solved within the self-interested rationality paradigm.

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Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 230.

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Length: 46 p.
Date of creation: 2009
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp230

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Keywords: Equivalised income; scale elasticities; life satisfaction;

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References

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Are children a source of happiness or not?
    by Economic Logician in Economic Logic on 2009-11-05 15:55:00
  2. Children & happiness
    by chris dillow in Stumbling and Mumbling on 2009-11-09 14:34:58
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Leonardo Becchetti & Andrew E. Clark & Elena Giachin Ricco, 2011. "The value of diplomacy: Bilateral relations and immigrant well-being," PSE Working Papers halshs-00580907, HAL.
  2. repec:hal:wpaper:halshs-00580907 is not listed on IDEAS
  3. Leonardo Becchetti & Alessandra Pelloni, 2013. "What are we learning from the life satisfaction literature?," International Review of Economics, Springer, vol. 60(2), pages 113-155, June.
  4. Thomas Hansen, 2012. "Parenthood and Happiness: a Review of Folk Theories Versus Empirical Evidence," Social Indicators Research, Springer, vol. 108(1), pages 29-64, August.

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