1. Economic Returns of Childrearing and Fertility Transition
Nicole Mun Sim Lai

2. Caldwell’s Wealth Flow Theory (1976)
Economic value of children and the direction of intergenerational wealth flows determine the incentive of childbearing
Empirical assessments of economic returns to childrearing have shaky foundations
Qualitative data
Do not measure the whole lifecycle
Ignore intra-household transfers

3. Objective & Contribution
Examine the economic returns of children during the fertility transition
Describe a new method for assessing the economic returns to the average parent over the entire parental lifecycle

4. Methods
Measure the net familial transfers of the average parent over the entire parental lifecycle
Average net upward transfers received by a parent at age a of birth cohort c
Average child costs given by a parent at age a of birth cohort c
Historical familial transfers ( ) &
net upward transfers projection ( )

7. Parents of high cohort fertility (5-3
Parents of high cohort fertility (5-3.5 children) receive positive net familial transfers from children. The direction is upward
Parents of low cohort fertility (<3.5 children) receive negative net familial transfers from children. The direction is downward.
Support Caldwell’s Wealth Flow Theory

8. Does the timing of the fertility reduction correspond to the timing of the changes in the direction of net transfers?
No: if use net familial transfers
Maybe: if use net familial transfers plus opportunity cost of physical investment

10. Conclusion
Children are net economic benefits to parents of high cohort fertility & net economic costs to parents of low cohort fertility.
Parents rely on children for old-age support
Our approach is more comprehensive and
return estimates are higher than previous studies
(Stecklov (-31.5%); R. Lee 2000 (-6.7%); R. Lee and K. Kramer 2002)
Implication: Trend shows that children are net economic costs to young parents in current decade.
Pronatalist programs for declining fertility