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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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  1. Joseph G. Altonji & Fumio Hayashi & Laurence Kotlikoff, . "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," IPR working papers 95-22, Institute for Policy Resarch at Northwestern University.
  2. 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.
  3. Robert J. Barro & Gary S. Becker, . "Fertility Choice in a Model of Economic Growth," University of Chicago - Population Research Center 88-8, Chicago - Population Research Center.
  4. Robert Tamura, 2002. "Human capital and economic development," Working Paper 2002-5, Federal Reserve Bank of Atlanta.
  5. Marla Ripoll & Juan Carlos Cordoba, 2011. "A Contribution to the Economic Theory of Fertility," 2011 Meeting Papers 1207, Society for Economic Dynamics.
  6. Lapan, Harvey E. & Enders, Walter, 1990. "Endogenous fertility, Ricardian equivalence, and debt management policy," Journal of Public Economics, Elsevier, vol. 41(2), pages 227-248, March.
  7. Schoonbroodt, Alice & Tertilt, Michele, 2010. "Property rights and efficiency in OLG models with endogenous fertility," Discussion Paper Series In Economics And Econometrics 1020, Economics Division, School of Social Sciences, University of Southampton.
  8. Jonathan Guryan & Erik Hurst & Melissa Schettini Kearney, 2008. "Parental Education and Parental Time With Children," NBER Working Papers 13993, National Bureau of Economic Research, Inc.
  9. Gary S. Becker & Kevin M. Murphy & Robert Tamura, 1994. "Human Capital, Fertility, and Economic Growth," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 323-350 National Bureau of Economic Research, Inc.
  10. Quamrul Ashraf & Oded Galor, 2011. "Dynamics and Stagnation in the Malthusian Epoch," American Economic Review, American Economic Association, vol. 101(5), pages 2003-41, August.
  11. Fernando Alvarez, 1999. "Social Mobility: The Barro-Becker Children Meet the Laitner-Loury Dynasties," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 65-103, January.
  12. Michele Tertilt, 2010. "Who Owns Children and Does it Matter?," Discussion Papers 09-003, Stanford Institute for Economic Policy Research.
  13. Matthias Doepke, 2004. "Accounting for Fertility Decline During the Transition to Growth," Journal of Economic Growth, Springer, vol. 9(3), pages 347-383, 09.
  14. de la CROIX, David & VANDER DONCKT, Marie, 2008. "Would empowering women initiate the demographic transition in least-developed countries?," CORE Discussion Papers 2008043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. Jones Charles I., 2001. "Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(2), pages 1-45, August.
  16. Kalemli-Ozcan, Sebnem, 2003. "A stochastic model of mortality, fertility, and human capital investment," Journal of Development Economics, Elsevier, vol. 70(1), pages 103-118, February.
  17. Andrew B. Abel, . "Operative Gift and Bequest Motives," Rodney L. White Center for Financial Research Working Papers 09-87, Wharton School Rodney L. White Center for Financial Research.
  18. Galor, Oded & Moav, Omer & Vollrath, Dietrich, 2008. "Inequality in Land Ownership, the Emergence of Human Capital Promoting Institutions and the Great Divergence," CEPR Discussion Papers 6751, C.E.P.R. Discussion Papers.
  19. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  20. 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.
  21. Larry E. Jones & Alice Schoonbroodt, 2007. "Complements versus Substitutes and Trends in Fertility Choice in Dynastic Models," NBER Working Papers 13680, National Bureau of Economic Research, Inc.
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