The Rich vs Poor Debate: Are Kids Normal or Inferior Goods?

Are you likely to have more kids if you are rich or poor?  Or to put this in econo-jargon: Are kids normal or inferior goods?  (Reminder: When you get rich you buy more of a “normal good,” and less of an “inferior good.” And yes, the language of economics can be a bit cold.)

This is a question that’s central to a debate between Betsey Stevenson and Bryan Caplan. Recall, Bryan is the guy who argues that having kids needn’t be as expensive or time-consuming as we make them. Fair enough. But he then makes the leap to arguing that we should all have more kids. In her response, Betsey noted:

Caplan is entirely focused on the substitution effect: having kids becomes cheaper relative to buying TVs. So he says buy more kids, and fewer TVs. But what about the income effect? As people become richer, they tend to “buy” fewer children, not more. So there’s an offsetting income effect.

In a follow-up, Bryan runs some regressions that he thinks suggest that Betsey is wrong to say that the rich have fewer kids than the poor. It’s a brave person who debates Betsey on the data. And I think he’s tying himself in regression knots, rather than getting at the issue.

Let’s focus on the big picture. Here’s a Gapminder plot showing that those of us born in rich countries have fewer kids than those born in poor countries:

Or we could look at the time series evidence. Gapminder lets me trace fertility and income for each country since 1960.  The plot below shows that as the U.S., China, India and the Asian tigers all got richer, in each case their people stopped having as many kids, too. For evidence on more countries, read this piece in The Economist.

 

To see a much longer time series, turn to Larry Jones and Michele Tertilt and their paper “An Economic History of Fertility in the U.S.: 1826-1960” [ungated version], which shows that as the U.S. got richer over time, fertility fell.  [Legend for graph below: The blue line is “Children ever born”; orange is the “total fertility rate”; and the green line is just the orange line shifted back 27 years to make these different measures of fertility comparable.]

Given the time scale here, it’s not just that the invention of contraceptives changed everything— this is a long-run pattern, perhaps knocked around a bit by war.

Or we could look at the cross-section, comparing rich and poor Americans. The following plot also comes from Jones and Tertilt, who compare children ever born with the average income of the occupation of husbands. (They have to use this indirect measure because the census didn’t collect useful income data until relatively recently). Each downward-sloping line tells the same story for a different cohort: the rich have fewer kids than the poor. And the results show a staggering consistency—this pattern has been true for each cohort for over one-and-a-half centuries.  It’s as true for the pre-Pill cohorts as those with access to modern contraceptives.

In a related paper, Alice Schoonbroodt and Michele Tertilt say that, “There is overwhelming empirical evidence that fertility is negatively related to income in most countries at most times.” They are right. Whether you cut the data across countries, through time, or across people at a point in time, the same fact arises: The richer you get, the fewer kids you have.

Yep, kids aren’t normal.

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  1. Annmaria says:

    One reason may be the opportunity cost as parents take time from high paying occupations to care for children.

    Another possibility is that children cost richer families more. We expected to pay over $200K for each of our childrens tuition k through college. We had four anyway because we wanted to but we are definitely outliers in our neighborhood.

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  2. Hugh Sheehy says:

    Another paper relevant to the topic

    http://www.ehs.org.uk/ehs/conference2011/Assets/ClarkFullPaper.pdf

    The most interesting line is in the intro:

    “There is one big change between the years before and after 1850. Before then elites had higher fertility than the poor. Since then elite groups display much lower fertility, so that the permanent effect of a period spent at the social summit is a reduction in number of descendants, even when the group returns to average status”

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  3. Andrea says:

    It might help to look at biology here. How did species that have relatively few offspring ever evolve if having more offspring is better? The answer is that putting more resources into fewer offspring can be a competitive advantage, and that is the case within a species as well as between species. From an economic standpoint, having more children means that available resources (wealth, parental attention) have to be split between the offspring. Too many offspring means that each one gets less compared to a similar family where there are fewer offspring.

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    • Minari says:

      Last time I checked humans don’t live like cattle just to eat, sleep, live and survive. We produce, think, create, invent etc etc. A clear difference between animals and humans is that many infants of mammals can walk within MINUTES of their birth. They are already conscious of their thought and being etc. Human babies are the most disadvantaged in the animal kingdom. S/he can’t talk, walk etc and consume so much energy and time. Having too much kids for humans is NOT advantageous if you are poor, it is VERY disadvantage.

      So why do Humans, when poor, still procreate in large numbers. Simple: Culture, prestige and lack of education (contraceptives). Lots of children = a sign of wealth. Example China, pre-”one-child policy” many Chinese had over 10 children or greater. Many they could not afford and died because of the poverty. So why were they having so much children, instead of having just 2 kids and putting most of their resource on them. It was because in Chinese culture (like many African cultures) view having a lot of children as looking wealthy (as only wealthy people can afford to have tons of children examples, emperors and kings etc.). This way of thinking hindered the Chinese community and resulted in the “one-child policy”. Now many Chinese are known to have just 1 or 2 and rarely 5. How did this change? Due to education and contraceptives. The Chinese in China are still having the SAME amount of sex and experience some of the worse poverty to date (mainly due to their communist times) but because of educating the public about the harms of having too much children you can’t afford, and using condoms and birth control pills, birth rates drop rapidly!

      The poor having a lot of children only bc: 1) It is cultural accepted and encouraged (in Middle East, Africa, Asia etc) as it is a sign of “wealth”
      2) Lack of education and contraceptive (sex ed) + have a lot of free time and lack of ambition for other tasks that result in making poor choices (thats why you never see the passionate high school student who wants to be a neurosurgeon become a teen mom/dad compared to the high school drop out.

      For Humans: Having lots of children =/= Beneficial. It hinders life, destroys futures and lives and is a huge disadvantage.

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      • Minari says:

        *I meant other animals,
        its like saying bonobos just have sex all day (when in heat) so thats what humans want to do and should be doing. Humans are VERY different to other animals in the kingdom, and yes we do have similarities but just bc something is similar doesn’t mean they are exactly the same

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  4. ZKu says:

    What if the kids are an inferior good for the low & middle part of the income distibution and luxury good for the rich. Poor need them as social security, rich have them to display wealth. They can afford nannies & schools and thus do not need to bear the burdens of parenting on their own. Unbiased sample of a Brangelina family proves the point…

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  5. Otter says:

    Kids make people happy, luxury items make people happy. If you can’t afford luxury items, you have kids.

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    • Lee says:

      For every kid that increases the happiness of their parents, I’ll wing it and say that there are probably two kids who bring sadness & grief to their parents: drug abuse, relationship failure, prison inmate, lousy judgement in just about any area. Seems that I read a study not long ago that stated that kids actually don’t do much to bring parents together more solidly, but rather have the opposite effect.

      Finally, in this day and age of unsustainable life-styles, the last thing the world needs is a bunch of kids. Perhaps this is one reason that the rich have fewer children….and increased awareness of the negative impact on the world.

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  6. Inkraven says:

    Rich people have fewer children than poor people because rich people are busy doing rich people things (i.e. becoming educated and making money). Poor people don’t have much else to do except go to their job, come home, watch TV, and screw. Rich people also possess better future time orientation than poor people and as such don’t randomly have kids they’re ill-equipped to properly support.

    Let’s also not dismiss the rise of feminist policies that moved large numbers of women from homemaking (and having/looking after children) to paid employment. Work-life balance and being fulfilled and all that.

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  7. Steve says:

    It would be an interesting, albeit impossible study, to see how things like religion, family history, and other factors play into this. I would conjecture that the rich are somewhat less religious – not that they are necessarily atheist or agnostic, but if an educated man heard “the bible said to be fruitful and multiply”, he might think of it in context, while the uneducated might blindly pop out babies (and there is a correlation between education and income). It could also be that if you grew up in a big family, you may also want a big family, and getting richer might barely decrease the size. As an example, if you grew up in a family with 10 kids and went from poor to rich, you still may want 4 kids. There are also things other posters have mentioned like importance of career might also play in.

    It was shown above a correlation between income and fertility…getting to the causation on this one would be greatly interesting.

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    • Ryan P says:

      Yeah, nice to try to get at causation. E.g., by trying a multiple regression analysis instead of handwaving at a raw correlation and saying, “this is the sum of all possible knowledge!”

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  8. Mark says:

    You’ve omitted Caplan’s point about education being a confounding factor (http://econlog.econlib.org/archives/2011/06/kids_are_normal.html).

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    • Ryan P says:

      Which is problematic, since that was Caplan’s entire point. So it’s hard to see how the post above is at all responsive

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