Question

Macroeconomic household theory of Fertility

Answer 1

Microeconomic Theory of Fertility: An Illustration • If there is an upward shift in income, it’s possible to afford both more children and consumer goods • Typically, poor families have more children that rich families. Are children inferior goods? •The opportunity cost of having children, especially for women, increases with economic development. •There is a quantity-quality trade off. At higher levels of development, parents choose to invest more time and money per child. 20 As Y ↑, the OC of time also ↑ and parent prefer to invest in child quality rather than in child quantity. It implies that they spend more time and money on a smaller number of children.