The Effect of Child Endowment on Fertility Choices

• Department of Economics

In this seminar, Professor Victor Lavy (Hebrew University, University of Warwick, and NBER) will present the paper: "The Effect of Child Endowment on Fertility Choices".

Past research has tested the quantity-quality (QQ) model of fertility by studying a shock to quantity, typically by exploiting the birth of twins or China's one-child policy. We take an alternative approach and study the effect of a quality shock on the QQ trade-off, which we conceptualize as the birth of a child with an exceptional intellectual endowment. Theory predicts that a rise (fall) in child endowment increases (decreases) parental demand for children due to changes in family income and the shadow price of children. Using Israeli data on intellectually gifted and intellectually disabled children, we test these predictions and estimate the reduced-form effect of a positive or negative quality shock on family size. Because families with exceptional-endowment children are different from those without, we propose quasi-experiments that exploit differences in the child's birth order. We find that the birth of a high-endowment child increases family size. However, as the information on child endowment becomes noisier, parents' ability to recognize its exceptionality becomes a condition for its effect. Similarly, the birth of a low-endowment child negatively affects family size, but only when that child is of higher birth order. Our results point to child endowment as an important factor affecting fertility choices.

Co-author: Yeshaya Nussbaum (Hebrew University)