Discussion Paper No.1611

Abstract :
This paper examines the policy effects of expanding formal child-care coverage on family fertility and education decisions in an overlapping generations model with Nash bargaining between sexes. The effects depend on a mother’s education level: If it is sufficiently high (low), then the policy lowers (raises) fertility and raises (lowers) educational investment in children in the long term. There is an intermediate case in which the policy raises both the fertility rate and educational investment in daughters but lowers investment in sons. The policy also raises the probability of marriage and child bearing by lowering the cost of having children.

Keywords : Nash bargaining; fertility; educational investment; child-care policy

JEL code: D91; H53; J13; J16