Economic Returns of Childrearing and Fertility Transition

Mun Sim Lai, University of Hawaii at Manoa

Empirical assessments of the economic returns to childrearing have shaky foundations, despite extensive literature on the value of children following Caldwell’s wealth flow theory. Our objective is to examine the economic returns to childrearing during fertility transition. In doing so, we describe a new method for measuring familial transfers, and assessing the economic returns from the average parent over the entire parental lifecycle. The method is then applied to detailed household economic data of Taiwan. Results show that children are net economic benefits for parents of high fertility cohorts, and children are net economic costs for parents of low fertility cohorts. Our results shed light on the significance of familial transfers in countries where social welfare for old-age is less established.