Thursday, October 23, 2008

Children as 'investment goods'

Two Italian economists have a new study that asks why birth rates are falling in more developed countries. They look at an Italian policy change that decreased expected pension income for a lot of people, and found that couples with a bigger drop in future income prospects were significantly more likely to have a child. They conclude that children are more likely seen as "a source of future financial support for their retired parents, as opposed to the traditional 'consumption' motive which suggests that a reduced pension income should lead to a reduction in parents' consumption and, therefore, fertility." In other words, one way to see kids is as a future source of financial support (investment) or a drain on one's budget (consumption). I assume that the connection to lower birth rates in developing countries in general is that as people have higher incomes and better standards of living, there is less of a concern about having that future financial support.

Even if this makes sense, I have to say that it's stuff like this that makes people think we economists have no heart...

1 comment:

Askew To You said...

This is an interesting theory. I wonder if things are culturally just different in Italy though. I have heard that sons are treated very differently by mothers there -never been there, just what I've read and I'm making assumptions here. The grown sons will continue to live with their mothers until they are fairly old. I wonder if that affects the way the theory was developed in Italy? The son take care of the mother and it's all very comfortable for them both?

And thanks for visiting Dating Dames, by the way. :D