Content area
Full Text
1. Introduction
Just as dogs were raised to hunt for their masters before they were pets, so in early traditional China children were raised as a source of income ... (Cheung 1972, p. 641).
Motivated by substantial empirical evidence on the negative correlation between fertility rate and income, Becker and Lewis (1973) formulated the idea that parents obtain utility from both the quality and the quantity of their children. Depending on the elasticity of substitution between quantity and quality of children in parents' utility function, this framework yields the important theoretical implication that individuals may spend more on the quality improvement rather than on the increase of the quantity of their children as their incomes rise.1 In fact, the Becker-Lewis model has become a pillar of population and family economics.
This article attempts to provide a simple extension of the Becker-Lewis model by introducing child labor into this framework. The model implies that the negative correlation between fertility and income can be obtained with much less reliance on the property of parents' utility function if child labor is considered. In particular, the model illustrates that, if both the quantity and the quality of children enter symmetrically into parents' utility function, without child labor, fertility may be a normal good so that it increases with parental income. However, when the role of child labor is taken into account, we obtain the opposite result: As parental incomes rise, fertility decreases and children are better educated.
The intuition for why child labor affects the interaction between the quantity and quality of children can be explained as follows. When children's earnings are sufficiently high relative to their cost, raising children is cheap but sending them to school is expensive. So, even if the quantity and the quality of children enters symmetrically into parents' utility function, parents may regard the quantity of children as a necessity and the quality of children as a luxury due to their price difference. As people demand more luxuries and fewer necessities when they become richer, fertility will decrease and children's educational attainment will increase when parental incomes rise.
This article also complements the recent theoretical literature on child labor started with Basu and Van (1998) in several aspects. First, it shows that fertility...