Economics of Fertility Chapter 5 Part II

Fertility Modern Economic Approach Preferences Demand for Child Service Quantity Quality U = U (CS, A) where A are all other good Production Child Services production function CS = F(T,Z) Where T is the Time involved and Z the cost of purchasing things for them

Fertility Modern Economic Approach COST Opportunity Cost CCS = C( WM, WF, PZ ) Changes in Costs Δ PCS / Δ WM > 0 Δ PCS / Δ WF > 0 Δ PCS / Δ PZ > 0

Fertility Modern Economic Approach Price PCS  CCS = C( WM, WF, PZ ) Full Income YF = ( WM X T ) + ( WF X T) + V DEMAND FOR CHILDREN CS* = D (PCS, PA, YF, Preferences

Fertility Modern Economic Approach: Comparative Statics A Change in Full Income Effects Income Effect Ξ Δ CS* / Δ YF > 0 A Change in the Wage Rate Substitution Effect Ξ Δ CS* / Δ WF < 0 Assuming constant YF

PRICE OF CHILD SERVICES AMOUNT OF CHILD SERVICES DEMANDED HOW AN INCREASE IN THE WAGE RATE AFFECTS THE AMOUNT OF CHILD SERVICES DEMANDED P1 P0 CS’ CSo CS1 D1 Do PRICE OF CHILD SERVICES AMOUNT OF CHILD SERVICES DEMANDED

THE EFFECT OF AN INCREASE IN THE WAGE RATE ON THE QUANTITY AND QUALITY OF CHILDREN P1 P0 N’ N1 No D1 Do PRICE CHILD QUANTITY (A) P1 P0 L’ Lo L1 D1 Do PRICE CHILD QUALITY (B)

THE EFFECT OF AN INCREASE IN THE WAGE RATE ON THE QUANTITY AND QUALITY OF CHILDREN Δ PL / Δ N > 0 Δ PN / Δ L > 0

MALTHUSIAN POPULATION GROWTH AND WAGES Wo BR DR BIRTH RATE, DEATH RATE WAGE (A) Wo W* L* S1 S* WAGE L (B) W1 So

THE GLOOMY EFFECT OF A DECLINE IN THE MORTALITY RATE W** W* BR DRo BIRTH RATE, DEATH RATE WAGE (A) DR1 W* L* S** S* WAGE L (B) W** D

THE GLOOMY EFFECTS OF AN INCREASE IN WORKER PRODUCTIVITY BR DR BIRTH RATE, DEATH RATE WAGE (A) W* L* S** S* WAGE L (B) W1 Do D1