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The Impact of Children on Australian Couples' Wealth Accumulation

  • Alfred Michael Dockery

    ()

    (School of Economics and Finance, Curtin University)

  • Sherry Bawa

    ()

    (School of Economics and Finance, Curtin University)

Existing estimates of the cost of raising children mainly focus on what parents spend on their children. This paper challenges the conceptual basis for this approach, and instead investigates how the presence of children impacts upon couples’ wealth accumulation using the life-cycle approach and Australian household panel data. Both the results presented here for Australia and those contained in the existing literature suggest that raising a family has a very small impact upon wealth accumulation relative to the ‘cost’ implied from expenditure-based estimates. In reconciling these highly divergent estimates, we argue the estimates from the wealth approach make more intuitive sense on a number of fronts, with implications for families and policy.

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File URL: http://ftprepec.drivehq.com/ozl/bcecwp/downloads/WP1302.pdf
File Function: First version, 2013
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Paper provided by Bankwest Curtin Economics Centre (BCEC), Curtin Business School in its series Bankwest Curtin Economics Centre Working Paper series with number WP1302.

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Length: 24 pages
Date of creation: Jun 2013
Date of revision:
Handle: RePEc:ozl:bcecwp:wp1302
Contact details of provider: Web page: http://business.curtin.edu.au/bcec
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  1. Banks, James & Blundell, Richard & Preston, Ian, 1994. "Life-cycle expenditure allocations and the consumption costs of children," European Economic Review, Elsevier, vol. 38(7), pages 1391-1410, August.
  2. Angus Deaton, 2005. "Franco Modigliani and the life-cycle theory of consumption," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 91-107.
  3. Anne Case & Darren Lubotsky & Christina Paxson, 2001. "Economic Status and Health in Childhood: The Origins of the Gradient," NBER Working Papers 8344, National Bureau of Economic Research, Inc.
  4. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
  5. Nicole Watson & Mark Wooden, 2010. "The HILDA Survey: Progress and Future Developments," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(3), pages 326-336.
  6. Pollak, Robert A & Wales, Terence J, 1979. "Welfare Comparisons and Equivalence Scales," American Economic Review, American Economic Association, vol. 69(2), pages 216-21, May.
  7. Trevor Breusch & Edith Gray, 2004. "New Estimates of Mothers’ Forgone Earnings Using HILDA Data," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 7(2), pages 125-150, June.
  8. Peter Saunders, 1999. "Budget Standards and the Poverty Line," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 32(1), pages 43-61.
  9. Martin Browning & Mette Ejrnæs, 2002. "Consumption and Children," CAM Working Papers 2002-06, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  10. Matthew Gray & David Stanton, 2010. "Costs of children and Equivalence Scales: A Review of Methodological Issues and Australian Estimates," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 13(1), pages 99-115.
  11. Bruce Bradbury, 2008. "Time And The Cost Of Children," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(3), pages 305-323, 09.
  12. Lancaster, Geoffrey & Ray, Ranjan, 1998. "Comparison of Alternative Models of Household Equivalence Scales: The Australian Evidence on Unit Record Data," The Economic Record, The Economic Society of Australia, vol. 74(224), pages 1-14, March.
  13. Modigliani, Franco, 1985. "Life Cycle, Individual Thrift and the Wealth of Nations," Nobel Prize in Economics documents 1985-1, Nobel Prize Committee.
  14. Deaton, Angus S & Muellbauer, John, 1986. "On Measuring Child Costs: With Applications to Poor Countries," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 720-44, August.
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