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Intergenerational Transfers and the Fertility-Income Relationship

  • Cordoba, Juan Carlos
  • Ripoll, Marla

�Extensive evidence from cross-sectional data reveals a robust negative relationship betweenfamily income and fertility. This paper argues that constraints to intergenerational transfersare crucial for understanding this relationship. If parents could legally impose debt obligationson their children as a way to recover the costs incurred in raising them, then fertility wouldbe independent of parental income. In this case, if the present value of a childÂ’s future incomeexceeds the cost of raising the child, as the evidence suggests is the case, parents would haveincentives to raise as many children as possible in order to maximize rents. A relationshipbetween fertility and income arises when parents are unable to leave debts behind either becauseof legal, enforcement, or moral constraints. We also derive the conditions under which thefertility-income relationship is negative. Notably, an intergenerational elasticity of substitutionlarger than one is required. In this case, parental consumption is a good substitute for childrenÂ’sconsumption making it optimal for income rich parents to have fewer children.Extensive evidence from cross-sectional data reveals a robust negative relationship between�family income and fertility. This paper argues that constraints to intergenerational transfers�are crucial for understanding this relationship. If parents could legally impose debt obligations�on their children as a way to recover the costs incurred in raising them, then fertility would�be independent of parental income. In this case, if the present value of a childÂ’s future income�exceeds the cost of raising the child, as the evidence suggests is the case, parents would have�incentives to raise as many children as possible in order to maximize rents. A relationship�between fertility and income arises when parents are unable to leave debts behind either because�of legal, enforcement, or moral constraints. We also derive the conditions under which the�fertility-income relationship is negative. Notably, an intergenerational elasticity of substitution�larger than one is required. In this case, parental consumption is a good substitute for childrenÂ’s�consumption making it optimal for income rich parents to have fewer children.

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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 37662.

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Date of creation: 05 Jun 2014
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Handle: RePEc:isu:genres:37662
Contact details of provider: Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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  8. Jonathan Guryan & Erik Hurst & Melissa Kearney, 2008. "Parental Education and Parental Time with Children," Journal of Economic Perspectives, American Economic Association, vol. 22(3), pages 23-46, Summer.
  9. David N. Weil & Oded Galor, 2000. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond," American Economic Review, American Economic Association, vol. 90(4), pages 806-828, September.
  10. Gary S. Becker & Robert J. Barro, 1986. "A Reformulation of the Economic Theory of Fertility," NBER Working Papers 1793, National Bureau of Economic Research, Inc.
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  13. 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.
  14. Cordoba, Juan Carlos & Ripoll, Marla, 2011. "A Contribution to the Economic Theory of Fertility," Staff General Research Papers 33899, Iowa State University, Department of Economics.
  15. David de la Croix & Marie Vander Donckt, 2010. "Would Empowering Women Initiate the Demographic Transition in Least Developed Countries?," Journal of Human Capital, University of Chicago Press, vol. 4(2), pages 85-129.
  16. Oded Galor & Omer Moav & Dietrich Vollrath, 2009. "Inequality in Landownership, the Emergence of Human-Capital Promoting Institutions, and the Great Divergence," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 143-179.
  17. Schoonbroodt, Alice & Tertilt, Michèle, 2014. "Property rights and efficiency in OLG models with endogenous fertility," Journal of Economic Theory, Elsevier, vol. 150(C), pages 551-582.
  18. Larry E. Jones & Alice Schoonbroodt & Michèle Tertilt, 2010. "Fertility Theories: Can They Explain the Negative Fertility-Income Relationship?," NBER Chapters, in: Demography and the Economy, pages 43-100 National Bureau of Economic Research, Inc.
  19. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  20. Larry E. Jones & Alice Schoonbroodt, 2010. "Baby Busts and Baby Booms: The Fertility Response to Shocks in Dynastic Models," NBER Working Papers 16596, National Bureau of Economic Research, Inc.
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  23. Charles I. Jones, 1999. "Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run," NBER Working Papers 7375, National Bureau of Economic Research, Inc.
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