Family Family, as Defined by the U.S. Census Bureau: "A Family Includes a Householder and One or More People Living in the Same Household Who Are Related to the Householder by Birth, Marriage, or Adoption. All

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Impact of Family Size on Investment in Child Quality: Multiple Births as a Natural Experiment.∗ Julio Caceres


caceresd@econ.umd.edu November 3, 2004

Abstract Using multiple births as an exogenous shift in family size, I investigate the impact of the number of children on child investment and child well being. Using data from the 1980 US Census Five-Percent Public Use Micro Sample, 2SLS results demonstrate that parents facing a change in family size reallocate resources in a way consistent with Becker’s Quantity & Quality model. A larger family generated by a twin on a later birth reduces the likelihood that older children attend private school, increases the likelihood that children share a bedroom, reduces the mother’s labor force participation, and increases the likelihood that parents divorce. The impact of family size on measures of child well being, such as educational attainment, the probability of not dropping out of school and teen pregnancy is, however, less clear. The results do however indicate that for both measures of child investment and child well being, the 2SLS estimates are statistically distinguishable from OLS estimates indicating an omitted variables bias in the single equation model. I would like to thank William Evans, Jonah Gelbach, Seth Sanders, Rodrigo Soares and Jeffrey Smith for their comments and advice. I also want to thank Roberto Alvarez, Juan Jose Diaz, Alexandra Jabin and Ye Zhang for helpful comments and discussions. Finally I want to thank the participants at the 17th Annual Congress of the European Society for Population Economics Society (13th to 15th of June 2003, New York City) and the participants in the Applied Microeconomics seminars at the University of Maryland for their comments and advice. The usual disclaimers apply. † PhD Economic Graduate Student at University of Maryland, College Park. ∗

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Introduction

During the last forty, years a multidisciplinary research effort has shown the essential role that family background (parents’ education, parents’ age, marital status, family income, parents’ employment, fertility, type of neighborhood, etc.), in the educational attainment and future economics success of children (Haverman and Wolfe, 1995). In particular, the relationship between family size and children’s outcomes is conventionally addressed in what is known as the “quantity-quality” model (Becker, 1960; Becker and Lewis, 1973; Becker and Tomes, 1979, 1986).1 The key insight of this model is that the number of children in the household (quantity) and child investment (quality) are determined by parents in a framework similar in many ways to the one in which households decide their demand for any other generic commodity. However, quantity and quality are linked in a way unlike other commodities: their shadow prices are cross–related such that an exogenous increase in the demand for either of these two factors produces an increase in the “cost” of the other factor.2 A direct implication of the model is a trade–off between child investment and number of children in the family. In the empirical ground, however, this negative influence of family size has been often studied at the level of child wellbeing. Nevertheless, independently of the outcomes that have been used the evidence has supported a negative influence of family size even on measures of child wellbeing. However there is still doubt among researchers if this observed impact embeds a causal relationship given the simultaneity of fertility and child outcomes.3 Additionally, the link between child wellbeing and family size is less clear As Haveman and Wolfe (1995) point out, Becker’s model of home investments in children can be considered as one of four main research lines when child outcomes are restricted to scholastic achievements. The other three lines that are mentioned are: a) Estimates of intergenerational income correlations through improved measures of father’s earnings and adjustment for...
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