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The optimal trade-off between quality and quantity with uncertain child survival

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  • BAUDIN, Thomas

    () (Université catholique de Louvain, CORE and IRES, B-1348 Louvain-la-Neuve, Belgium)

Abstract

The present paper investigates a standard model of endogenous fertility when child survival to adulthood is uncertain. In this framework, I first show that facing the risk their children die before reaching adulthood, parents don’t always formulate a precautionary demand for children. Indeed, there exists a non-empty set of utility functions for which parents undershoot their number of children rather than overshooting it. Second, the properties of the optimal economic policy will crucially depend on the manner the Social Welfare Function takes uncertainty into account. More precisely, if Social Welfare is evaluated after the resolution of uncertainty, the parental response to uncertainty is a source of social inefficiency. Then, individual decisions have to be corrected through tax or transfer on both births and education. This property becomes crucial to determine the optimal public response to a mortality crisis in presence of positive externalities on education.

Suggested Citation

  • BAUDIN, Thomas, 2010. "The optimal trade-off between quality and quantity with uncertain child survival," CORE Discussion Papers 2010057, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2010057
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    File URL: http://www.uclouvain.be/cps/ucl/doc/core/documents/coredp2010_57web.pdf
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    References listed on IDEAS

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    1. David de la Croix & Matthias Doepke, 2003. "Inequality and Growth: Why Differential Fertility Matters," American Economic Review, American Economic Association, vol. 93(4), pages 1091-1113, September.
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    Cited by:

    1. Thomas Baudin, 2011. "Family Policies: What Does the Standard Endogenous Fertility Model Tell Us?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(4), pages 555-593, August.

    More about this item

    Keywords

    fertility; uncertain child survival; optimal conditions; family policy;

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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