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Children as Family Public Goods: Some Implications for Fertility

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  • Miriam Steurer

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    (School of Economics, The University of New South Wales)

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    Abstract

    A two-stage bargaining model is developed to describe how fertility decisions are made in a strategic family setting. Given the assumption that family contracts are incomplete and cannot be used to enforce optimal behavior, it is shown that investments in children (i.e. the fertility rate) may be sub-optimal. This is because the woman may find it in her interest to invest too little in children in stage 1 of the model in order to protect her bargaining status in stage 2. I then consider in the context of this model the impact on fertility rates of changes in child custody rules (in the case of divorce), the wage rate, and the male-female wage differential. I conclude by exploring how the introduction of child subsidies can change the results.

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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2009-04.pdf
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    Bibliographic Info

    Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2009-04.

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    Length: 41 pages
    Date of creation: Mar 2009
    Date of revision:
    Handle: RePEc:swe:wpaper:2009-04

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    Keywords: Family bargaining; Fertility; Child subsidies; Labor Participation Rate;

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    1. Gary S. Becker & Kevin M. Murphy & Robert Tamura, . "Human Capital, Fertility, and Economic Growth," University of Chicago - Population Research Center 90-5a, Chicago - Population Research Center.
    2. Mukesh Eswaran, 2002. "The empowerment of women, fertility, and child mortality: Towards a theoretical analysis," Journal of Population Economics, Springer, vol. 15(3), pages 433-454.
    3. Cigno, Alessandro & Luporini, Annalisa & Pettini, Anna, 2003. "Transfers to families with children as a principal-agent problem," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1165-1177, May.
    4. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    5. Pollak, Robert A, 1985. "A Transaction Cost Approach to Families and Households," Journal of Economic Literature, American Economic Association, vol. 23(2), pages 581-608, June.
    6. Philip A. Trostel, 2004. "Returns to scale in producing human capital from schooling," Oxford Economic Papers, Oxford University Press, vol. 56(3), pages 461-484, July.
    7. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    8. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
    9. Daniel Sullivan, 1997. "Trends in real wage growth," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Mar.
    10. Gunderson, Morley, 1989. "Male-Female Wage Differentials and Policy Responses," Journal of Economic Literature, American Economic Association, vol. 27(1), pages 46-72, March.
    11. Betsey Stevenson, 2006. "The impact of divorce laws on marriage-specific capital," Working Paper Series 2006-43, Federal Reserve Bank of San Francisco.
    12. Iyigun, Murat & Walsh, Randall P., 2007. "Endogenous gender power, household labor supply and the demographic transition," Journal of Development Economics, Elsevier, vol. 82(1), pages 138-155, January.
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