The Influence of Children on Family Life Cycle Spending Behavior: Theory and Applications

This study examines the effect of children on family consumption decisions during different stages of the life cycle. An empirical model that incorporates both continuous measures of adult equivalence and a flexible functional form is used. Results indicate that durables, food eaten (purchased) away from home, and adult clothing are luxury goods for two‐child families. Economies of scale are noted for food and shelter expenditures. Two‐child families substitute out of expenditures for meals eaten away from home, adult clothing, and other goods and services to meet increased demand due to the children's presence.