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.

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.

 

COMMENTS: 74

View All Comments »
  1. James says:

    Perhaps there is a fairly simple explanation. Take those “normal” goods, or for an instance (since I just finished breakfast) blueberries. I buy more of them when they’re cheap relative to my income, but no matter how cheap they are, I never buy more than I want to eat. Which seems true of any good: I may not be able to afford as much as I want, but I don’t buy more than I want even if I can afford it.

    So employ inverse thinking, and consider access to means of limiting the number of offspring as the normal good. The rich have always had ways (sometimes covert) of limiting the number of children they have to the number actually wanted. The poor have not often been able to afford this luxury, and so have generally had more offspring than wanted.

    Well-loved. Like or Dislike: Thumb up 13 Thumb down 0
    • Gazelle says:

      Relative to the comments here which are very interesting:
      1) I’m the oldest of 6 married to the middle of 5, we have 0 children.
      2) Does the “poor have more children, rich have fewer” take into account rich people making babies with “the help” or the poor people for whatever reason?

      Thumb up 0 Thumb down 1
  2. Tara says:

    What about the age at which women have children? As countries grow richer, and people within these countries grow richer, the age at which women begin to have children is pushed back. Later start to childbirth = less potential children.

    Well-loved. Like or Dislike: Thumb up 37 Thumb down 0
  3. Mike B says:

    One could argue that the wealthier people are the less they are apt to make poor life decisions like buy things they can’t afford. It is hard to deny that children do not fit into this category so a properly raised child costs something like half a million dollars over the course of its developmental period.

    A properly raised child is one that will actually begin to return on its investment. Sure you can have a child, never provide it with any enriching activities, send it to a low cost school and then not provide funding for a college education, but when that child is unable to find employment or gets in trouble with the law instead of providing assistance to the aging parents it will further drain resources from them.

    In poor countries where unskilled workers can still make a reasonable living the return on investment for a child is much higher. Children can mature as workers in 6-8 years and reach full productivity in their teens. While the return per child is much lower compared to children in developed countries, the costs of the investment are far lower so having a lot of kids can make sense. Fortunately for anyone not engaged in a subsistence lifestyle, the gains to basic education more than offset the loss of early life work potential so if a family can afford basic education they will be more than repaid with increased earnings of their child later in life and more leisure time up front. As living standards rise those without the necessary childhood investment will see their returns go negative thus further encouraging parents to have less kids.

    Well-loved. Like or Dislike: Thumb up 18 Thumb down 1
  4. Joshua Northey says:

    A) Kids aren’t “goods”, and parents don’t “buy” them for the same reason they buy goods. So I am not sure that is a fruitful way to look at it.

    B) A lot of the difference is in unintended kids.
    i) I would bet the difference between the well off and the less well off on intended kids is much smaller. Conversely the difference in unintended kids is greater.
    ii) Unintended kids are the result of poor impulse control/planning, which does not correlate well with wealth.
    iii) Wealthy people also generally having more resources to throw at birth control.
    iii) Wealthy people also have more to lose when making mistake, which ties in with my next point.

    C) Boredom/opportunity cost.
    i) A less well off person is giving up lower quality things when they have kids. If having kids mean you can only watch 6 hours of TV a night instead of 4, well not such a big deal. If it means you cannot just fly to Switzerland this weekend it is more of a hamper on your style.
    ii) Less well off people also have fewer meaningful projects in their life (due to a decreased ability to dictate its terms), so children are an attractive option for those who have hit a “meaning” wall. Which ties into the following.

    D) Life habits
    i) Well off people have more schooling to get through before it is acceptable for them to have children. Perhaps by this time they are more habituated to their childless circumstances, and have developed habits less compatible with children.
    ii) Meanwhile the less well off reach a point in their life where they feel like their situation is not going to change earlier.

    E) Poorer people are more religious. Religion is generally pro-spawning/anti-birth control.

    Well-loved. Like or Dislike: Thumb up 25 Thumb down 7
    • Jon D says:

      I agree with about half of your comments. In particular, A, B i, and B iii. However,regarding a few of the others:

      B ii) Unintended kids are the result of poor impulse control/planning, which does not correlate well with wealth.”

      I’m not convinced that poor people are less able to resist their sexual urges than wealthy people. I haven’t seen any studies that would prove or disprove this theory but anecdotal evidence seems to indicate that many wealthy men are often quite incapable of controlling their own impulses. Also, I’m not entirely sure that “poor impulse control/planning” necessarily has a negative correlation with wealth. It sounds logical and may actually be the case, but I wouldn’t automatically concede that point.

      C i)” … If having kids mean you can only watch 6 hours of TV a night instead of 4, well not such a big deal. If it means you cannot just fly to Switzerland this weekend it is more of a hamper on your style.”

      But what if we consider these scenarios which are equally valid: If you are working two jobs to make ends meet and having kids means paying a babysitter an amount which is close to your own hourly wage, then that IS a big deal. On the other hand, if it only means that you need to pay a nanny 5% of your own salary so that you can fly off to Switzerland for the weekend, well it won’t hamper your style much at all.

      C ii) ” Less well off people also have fewer meaningful projects in their life (due to a decreased ability to dictate its terms), so children are an attractive option for those who have hit a “meaning” wall. ”

      This depends entirely on how you define “meaningful”. I don’t think money gives someone a more meaningful existence.

      D ii) “Meanwhile the less well off reach a point in their life where they feel like their situation is not going to change earlier.”

      One could argue that the wealthy (at least those who are raised by wealthy parents) reach a point where their “situation is not going to change” very early in life. They are born wealthy, and due in part to the advantages given them, they will likely at least live comfortable lives regardless of when they choose to have children. The poor, on the other hand, may feel that they at least have some hope of improving their lot in life by waiting.

      Of course, none of this is intended to argue the main point of the article. The poor obviously do have more children than the rich. I just don’t necessarily think it’s due to all the reasons you outlined.

      Well-loved. Like or Dislike: Thumb up 7 Thumb down 2
  5. Joel Upchurch says:

    You overlook that drops in fertility rates are often associated with urbanization. The fertility rate in Mexico has dropped to 2.1 which is considered ZPG, while they are quite poor compared to the other countries you mentioned. Iran has a fertility rate of 1.8, which is much lower than the U.S.

    You have to remember that in rural areas children often have a positive R.O.I., since they can help around the farm. In urban areas children impose a cost on their parents by preventing the mother from working. Apparently a paycheck is an effective contraceptive.

    Well-loved. Like or Dislike: Thumb up 25 Thumb down 2
  6. Marcus Kalka says:

    Hidden due to low comment rating. Click here to see.

    Disliked! Like or Dislike: Thumb up 5 Thumb down 10
  7. StatSpotting.com says:

    You are missing the main angle, if you are poor, more kids mean more hands that can do more work and get more food home.

    Thumb up 10 Thumb down 9
    • caleb b says:

      If you are really poor, more kids equal a bigger welfare check.

      Well-loved. Like or Dislike: Thumb up 26 Thumb down 17
      • Enter your name says:

        Before the Clinton-era reforms, the US certainly did see some women deliberately having more children for the primary purpose of keeping the welfare checks coming. I remember talking to a lawyer a while ago about one of her clients, who had carefully timed her (five) pregnancies to produce the maximum number of welfare checks for the minimum number of children.

        However, since most people aren’t on welfare, and since every country has different rules, this is unlikely to have a visible effect on the “poor country vs rich country” comparisons. (It will show up in the same-country analyses, but the effect in the US should fade over time, since we’re no longer incentivizing that behavior.)

        Additionally, the classic “welfare mom” has every child with a different father. Having (another) baby is supposed to buy her attention—and social status and financial assistance—from the boyfriend. The typical middle-class mother doesn’t have this dysfunctional relationship with childbearing; she gets a child out of a pregnancy, not a boyfriend.

        Well-loved. Like or Dislike: Thumb up 8 Thumb down 2
      • Jim Thio says:

        Does inferior goods require that the price is constant? The cost of rising kids go up as the parents get richer. So that’s why they buy less. In a sense, kids are more expensive for the rich than the poor. Are there data where the cost of making kids (cost of marriage, opportunity costs) constant and the rich still make less kids?

        Thumb up 2 Thumb down 0
  8. AaronS says:

    What if the same attributes that make a person or country wealthy (single-minded pursuit, a sort of ruthlessness, greed, etc.) also conspire to make them prefer less kids?

    Wealth not only requires effort from us, but it also gives us many more options. If a child competes with some of these choice options–or perhaps threatens to delay the obtaining of such perks–we might be willing to put off childbearing.

    Years ago, when a young woman’s options were (I generalize) to get married and have a family or be an old maid, the choice, coupled with natural instinct, was to have kids. But now, with it important to finish college, perhaps grad school, to become established in our careers–in other words, the wholehearted pursuit of some degree of status and/or wealth–family matters might get delayed.

    Oddly enough, even the LOSS of wealth (or fear thereof) might conspire to this end. For instance, if you were a successful lawyer five years ago, but today aren’t sure of your future prospects, you might prefer to put off having any more kids in order to, ensure your financial stability.

    The logical end would seem to be for the wealthy to not have any kids at all. But then you wouldn’t have anyone to leave your wealth to, thereby ensuring your memory. Of course, one lady left millions to her cat. Probably a good thing she didn’t have any kids (if she did, I feel kind of sorry for them).

    Thumb up 2 Thumb down 2