fertility and development.ppt

8/10/2019 Fertility and Development.ppt

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Microeconomic Household Theory of Fertility

Demand for Children in Developing Countries

First two or three as consumer goods

Additional children as investment goods:

Benefits: Work on family farm, Old age security

motivation Costs: Mothers time, education expenses

Trade-off between quality and quantity


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Fertility and missing markets

Children are substitutes for various missing markets

especially social security in the old age

Developed countries: Social security fund or employer

subsidized retirement plan along with medical insurance

In developing countries, many of these institutions are

totally missing and the available institutions are only for

formally employed (not for agricultural and urban informal

sectors)


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Costs of Children in the poor countries

Because children are an investment rather than a

consumption good the expected return of the

investment is given by child labor and financial

support for parents in old age

Parents have children up to the point at which their

marginal economic benefit is equal to marginal cost


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Microeconomic Theory of Fertility

BACKGROUND

Uses conventional theory of consumer behaviour An individual tries to maximize satisfaction

Subject to income constraint and relative prices of all

goods

So children are considered as a special kind ofconsumption good

Fertility becomes a rational economic response to

demand for children relative to other goods


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Microeconomic Theory of Fertility

Where

Cdis the demand for surviving children

Yis the level of household income P

cis the netprice of children

Pxis price of all other goods

txis the tastes for goods relative to children

nxtPPYfC xxcd ,...,1),,,,( ==


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Under neoclassical conditions, we would expect:

The higher the household income, the greater the demand for children

The higher the net price of children, the lower the quantity demanded.

The higher the prices of all other goods relative to children, thegreater the quantity of children demanded.

The greater the strength of tastes for goods relative to children, the

fewer children demanded.



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0> Y

Cd0

x

d

P

C0

fertility and development.ppt

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