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Children and Demand: Direct and Non-Direct Effects

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Author Info
Valerie Lechene
Martin Browning

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Abstract

It is universally accepted that children have important effects on household demand patterns. This is usually attributed to the "direct" effect of children; for example children are food intensive. Alternative inferences are that the observed correlations between children and demand patterns are due to "non-direct" effects, such as fixed effects, state dependence or intra-household effects. These "non-direct" effects make the consistent estimation of direct effects problematic. We employ a French family expenditure survey that has a number of unusual features to explore the source of the correlation between children and demands. In a first set of tests, we use a sample of older households (over-55`s) for whom we have the details of their completed fertility and whether or not they currently have children living at home. We consider only those who do not have children currently living at home. If there are only direct effects then the demand patterns of those who have had children should be the same as those who never had children. We find that this is not the case. For the second set of tests, we use a sample of couples aged up to 55 and test for the exogeneity of children variables using background variables as instruments for children. We find that children are not exogenous for some goods. These two findings together cast doubt on the usual practice of identifying direct children effects with the coefficients on the children variables in demand equations.

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Publisher Info
Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 016.

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Date of creation: 2002
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Handle: RePEc:oxf:wpaper:016

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Related research
Keywords: children demand fixed effects state dependence intra-household effects

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Find related papers by JEL classification:
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christophe Kolodziejczyk, 2006. "Retirement and Fixed Costs to Work: An Empirical Analysis," CAM Working Papers 2006-09, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics. [Downloadable!]
  2. Lyn Craig, 2006. "Where Do They Find the Time?: An Analysis of How Parents Shift and Squeeze Their Time around Work and Child Care," Economics Working Paper Archive wp_439, Levy Economics Institute, The. [Downloadable!]
  3. Christophe Kolodziejczyk, 2006. "A Note on the Correlated Random Coefficient Model," CAM Working Papers 2006-10, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics. [Downloadable!]
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This page was last updated on 2008-11-17.


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