The Value of Children: Intergenerational Transfers, Fertility and Human Capital
نویسنده
چکیده
In this paper I investigate the relationship between fertility and old-age support in developing countries. In the first part of the paper, I present a two-period model. In the first period, parents decide on the quantity and the quality of children and savings. In the second period, children decide on transfers to parents. I then derive the effects of an exogenous increase in fertility in the first period on parents’ and children’s choices. I show that an exogenous shock to fertility decreases the transfers that each child makes to parents due to the increase in sibship size but, despite that, the total transfers parents receive from children increase. As parents adjust their investment in children’s quality and savings, the overall effect of the increase in fertility on transfers is ambiguous. In the second part, I use household-level data from China and Indonesia to test the model predictions. I use the incidence of twins in the first birth as a source of exogenous variation in the quantity of children. I find that twinning in the first birth increases completed fertility of older mothers in China and Indonesia by 0.8 children. Then I show evidence that transfer to parents decreases in the number of siblings, but total transfers from children increase in the number of children. Lower savings cannot explain the increase in total transfers. However, parents do respond to the increase in fertility by reducing investment in their children’s human capital. Despite children having lower quality, the estimates indicate that parents consume more during old age. ∗I am extremely grateful to Professors Mark Rosenzweig, T. Paul Schultz, and Christopher Udry for their guidance and support. I am also thankful to Dan Keniston, Nancy Qian and all the participants of the Development Workshops at Yale University whose questions and suggestions benefited the paper.
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