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Household Production, Full Consumption and the Costs of Children

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  • Apps, Patricia

    ()
    (University of Sydney)

  • Rees, Ray

    ()
    (University of Munich)

Abstract

Recent work criticises both the logic and relevance of the theoretical basis of the approach to estimating the costs of raising children adopted in much of the economics literature. This tends to be restricted purely to models in which the household members consume market goods with given household income. The "costs of children" are perceived essentially as market consumption costs. This ignores the fact that an important, possibly preponderant element of child costs takes the form of parental time, which must be diverted from alternative uses such as market work, other house-hold production activities and leisure, to care for children. The studies also ignore the question of the distribution of income among adults and, in particular, the differential incidence of child costs on adult members of the household. In this paper we first of all argue that a satisfactory theoretical approach to modelling child costs must simultaneously incorporate an "individualistic" formulation of the household (as in Apps and Rees, 1988, 99) and a formal treatment of household production (as suggested by Becker 1965, and adapted in Apps and Rees, 1988, 99). We then provide such a model. Using data from a recent Time Use Survey, we estimate specialized versions of the model for families with two children and use the results to derive the intra-family distribution of resources and implied child-rearing costs.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 157.

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Length: 41 pages
Date of creation: May 2000
Date of revision:
Publication status: published in: Labour Economics, 2001, 8 (6), 621-648
Handle: RePEc:iza:izadps:dp157

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Keywords: household production; time allocation; Child costs;

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References

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  1. Joshua D. Angrist & Alan B. Krueger, 1990. "The Effect of Age at School Entry on Educational Attainment: An Application of Instrumental Variables with Moments from Two Samples," NBER Working Papers 3571, National Bureau of Economic Research, Inc.
  2. Patricia Apps & Ray Rees, 2001. "Household Saving and Full Consumpyion Over the Life Cycle," CEPR Discussion Papers, Centre for Economic Policy Research, Research School of Economics, Australian National University 428, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  3. Apps, Patricia F. & Rees, Ray, 1988. "Taxation and the household," Journal of Public Economics, Elsevier, Elsevier, vol. 35(3), pages 355-369, April.
  4. Apps, Patricia F & Rees, Ray, 1997. "Collective Labor Supply and Household Production," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(1), pages 178-90, February.
  5. Browning, Martin, 1992. "Children and Household Economic Behavior," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 30(3), pages 1434-75, September.
  6. Apps, P.F. & Rees, R., 1998. "On the Taxation of Trade Within and Between Households," Papers, Australian National University - Department of Economics 337, Australian National University - Department of Economics.
  7. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2000. "Tranfers to families with children as a principal-agent problem," CHILD Working Papers, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY wp02_00, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  8. Ugo Colombino, 2000. "The Cost of Children When Children are a Choice," LABOUR, CEIS, CEIS, vol. 14(1), pages 79-95, 03.
  9. FranÚois Bourguignon, 1999. "The cost of children: May the collective approach to household behavior help?," Journal of Population Economics, Springer, Springer, vol. 12(4), pages 503-521.
  10. Gronau, Reuben, 1991. "The Intrafamily Allocation of Goods--How to Separate the Adult from the Child," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 9(3), pages 207-35, July.
  11. Lanjouw, Peter & Ravallion, Martin & DEC, 1994. "Poverty and household size," Policy Research Working Paper Series 1332, The World Bank.
  12. Kapteyn, Arie & Van Praag, Bernard, 1978. "A new approach to the construction of family equivalence scales," European Economic Review, Elsevier, Elsevier, vol. 7(4), pages 313-335, May.
  13. Nelson, Julie A, 1993. "Household Equivalence Scales: Theory versus Policy?," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 11(3), pages 471-93, July.
  14. Pollak, Robert A & Wales, Terence J, 1979. "Welfare Comparisons and Equivalence Scales," American Economic Review, American Economic Association, American Economic Association, vol. 69(2), pages 216-21, May.
  15. Cigno, Alessandro, 1993. "Intergenerational transfers without altruism : Family, market and state," European Journal of Political Economy, Elsevier, Elsevier, vol. 9(4), pages 505-518, November.
  16. M Arellano & Costas Megir & Mary Silles, 1990. "Female Labour Supply and On-the-Job Search: An Empirical Model Estimated using Complementary Data Sets," CEP Discussion Papers, Centre for Economic Performance, LSE dp0009, Centre for Economic Performance, LSE.
  17. Gustafsson, Bjorn & Kjulin, Urban, 1994. "Time Use in Child Care and Housework and the Total Cost of Children," Journal of Population Economics, Springer, Springer, vol. 7(3), pages 287-306, July.
  18. Rees, Ray, 1988. "Taxation and the Household," Munich Reprints in Economics, University of Munich, Department of Economics 3411, University of Munich, Department of Economics.
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