Children are costly, but raising them may pay

OBJECTIVEThis article provides a non-technical introduction to analyses of fertility which are based on a rational-choice paradigm and which acknowledge that raising children may have a strong impact on the well-being of parents that can be described in terms of costs and benefits. It surveys different types of economic fertility models which can be used to address a variety of research questions, and it also discusses some basic strengths and weaknesses of applying economic analyses in this particular field.RESULTSStarting from a seminal contribution by Becker (1960) which may have been of little use for applied research or for interdisciplinary work, the economic theory of fertility has unfolded a differentiated research programme with indispensable contributions to the broader field of fertility research. Important features are the inclusion of (i) different bargaining positions and differing incentives of partners interacting in fertility choices; (ii) simultaneous decisions regarding labour force participation (as well as education) and fertility, and the role played by employers, labour market institutions, and other public interventions; (iii) the idea that children (or their "human capital") are investment goods with various kinds of returns that may be dispersed over an extremely long period of time, are subject to enormous uncertainties, and are strongly influenced by the social context and, again, by public policies.CONCLUSIONSEconomic aspects and elements of economic models should be included in any large - scale attempt at understanding fertility behaviour through interdisciplinary research. Improvements in the data infrastructure, which are only partly underway thus far, would be an important pre-requisite.1. IntroductionPopulation trends and their economic consequences have long been studied by economists, e.g. by Adam Smith (1776: ch. I.viii), Robert Malthus (1803), or John Maynard Keynes (1937). However, attempts at systematically explaining these macro- level trends through economic analyses - based, among other things, on a micro- economic theory of parental fertility choices - are a much more recent phenomenon. What is currently considered to be "the" economic theory of fertility can largely be taken to be a strand of literature inaugurated through a seminal contribution by Becker (1960). Over time, the research programme covered in this literature has grown substantially, not only through a multitude of extensions and adaptations brought forth by Becker and his followers (see, e.g., the contributions collected in Becker 1981, 1991), but also through the integration of alternative ideas developed by a number of independent researchers and critics (probably the most important being Easterlin 1969; Pollak 1985; Rosenzweig and Schultz 1985; or Cigno 1993).Economists were thus rather late in entering the field of fertility research. Also, when applying their analytical tools to this issue, they tended to ignore most of what other social scientists had done in this area beforehand, potentially offering a first-rate example of what is sometimes called "economic imperialism". As Leibenstein (1974: 458) put it,"to some of those who had been laboring in the vineyards of demography for decades, the efforts of economists in the sixties and seventies to develop a theory of fertility must have appeared like the invasion of a horde of primitives on a technologically advanced community proclaiming loudly their intent to reinvent the wheel."Ironically, this objection was raised by one of the few economists who had been working on fertility even earlier (cf. Leibenstein 1957). Leibenstein's substantive criticisms were that the new economic theory of fertility was formally rather complex, but at the same time far too rough regarding many details of real-world fertility behaviour to be of any practical value for applied research on this issue, beyond the mere replication of well-known results. …