Economic Incentives to Reduce Above-Replacement Fertility: Simulating the Quantity-Quality Tradeoff

Shonel Sen, Pennsylvania State University

The current paper applies the Quantity-Quality model to speed up the demographic transition and investigates incentives for curbing unsustainable fertility behavior in developing nations to ease the burden of a rapidly growing population. Existing empirical research just explores how greater number of children is usually associated with lower levels of quality but my static model actually estimates the elasticity magnitude and signs for different functional forms of household utility to demonstrate the change. Using simulations with data from India, I test the hypothesis that policy initiatives may not always yield anticipated results; one of the key findings is that simply subsidizing qualitative improvements in children (reducing cost of education alone without other investments in family planning etc.) may be insufficient to trigger the Q-Q tradeoff to curtail above replacement TFR. Reduction in parent’s out-of-pocket childcare costs to increase quality may prompt greater childbearing as children are now cheaper to raise.