The Chicago Model of Fertility
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Contents:
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Household equilibrium
The household is assumed to maximize its utility by selecting the optimal
combination of children and goods, given its budget constraint. That is
the point of tangency between the budget line and the indifference curve. |
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An increase in income
Assume that household income were increased (say through winning the
state lottery). This would shift out the budget line paralell to the old
budget line. The household can afford more of everything. If children are
normal goods, this would result in a greater number of births. |
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The shift to "higher quality"
children
Wealthier households have higher aspirations for their children. They
expect to provide more expensive food, housing, medical care, educations
etc. to their children. The result is that wealthier parents find that their
children are more costly than the children of poorer parents. This makes
the budget line steeper, causing wealthy parents to have fewer children. |
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Increasing women's wages
An increase in the wages of women leads to increased participation in
the labor force by women. This results in a higher opportunity cost for
children since children compete with employment for a mother's time. The
household's budget line may have moved outward but it is also steeper. Women
have fewer children and the population growth rate falls. |
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