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Children as Family Public Goods: Some Implications for Fertility

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  • Miriam Steurer

    ()
    (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. Gunderson, Morley, 1989. "Male-Female Wage Differentials and Policy Responses," Journal of Economic Literature, American Economic Association, vol. 27(1), pages 46-72, March.
    2. Becker, Gary S & Murphy, Kevin M & Tamura, Robert, 1990. "Human Capital, Fertility, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S12-37, October.
    3. 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.
    4. Daniel Sullivan, 1997. "Trends in real wage growth," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Mar.
    5. David Card & John E. DiNardo, 2002. "Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," NBER Working Papers 8769, National Bureau of Economic Research, Inc.
    6. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2000. "Tranfers to families with children as a principal-agent problem," CHILD Working Papers wp02_00, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
    7. 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.
    8. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    9. Betsey Stevenson, 2006. "The impact of divorce laws on marriage-specific capital," Working Paper Series 2006-43, Federal Reserve Bank of San Francisco.
    10. 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.
    11. 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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