Intertemporal Equivalence Scales: Measuring the Life-Cycle Costs of Children
AbstractThis paper provides a preliminary investigation into the lifetime cost of children upon a household's lifetime wealth. By comparing the lifetime cost function of a household with children compared to the lifetime cost function of a household without children, an intertemporal equivalence scale can be constructed. By allowing the rate of time preference to vary according to demographics, more specifically with the number of children, the demographic effect on intertemporal allocations can be examined. Solving the model as a function of wealth allows the estimation of the rate of time preference and lifetime equivalence scale in a single cross section of data without the need for panel data on expenditures. The model is estimated for Australian data and finds that households with children have significantly higher rates of time preference than those without
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society 2004 Australasian Meetings with number 249.
Date of creation: 11 Aug 2004
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Equivalence Scales; Intertemporal Cost Function;
Find related papers by JEL classification:
- D1 - Microeconomics - - Household Behavior
- D9 - Microeconomics - - Intertemporal Choice
- J1 - Labor and Demographic Economics - - Demographic Economics
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- Banks, James & Blundell, Richard & Preston, Ian, 1994. "Life-cycle expenditure allocations and the consumption costs of children," European Economic Review, Elsevier, vol. 38(7), pages 1391-1410, August.
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