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University of Toronto St. George
Aloysius Siow

Children as Public Goods From the parent’s point of view, the care of children is a public good. Providing services to the child will not only increase the father’s utility, but also the mothers. The issue is how to reach the efficient allocation while free riding exists. The 3 topics discussed are: the efficient provisions of public goods, the potential for free riding, and that free riding can be mitigated through repeated interactions of spouses with each other. SINGLE PARENT Budget constraint: c = e – q Utility function: U(c, q) where e = mother’s endowment q = child’s consumption c = mother’s consumption Solve for q max H(q) = U(e-q,q) Solution U ce-q*, q*) = U (q-q*, q*) Optimal own consumption c* = e – q* U* = U(c*, q*) The solution to the mother’s optimization problem, says that she will want to choose q such that she is equating her marginal utility of own consumption with her marginal utility of child’s consumption. When q =q*, the gain in utility from increasing her child’s consumption by ∆ marginal units is exactly equal to the loss in utility from decreasing her own consumption by ∆ marginal units. MOTHER MARRIED TO A FATHER Assume: neither parents cares about the welfare of the other parent Both parents will obtain higher utility than if they were to remain single because child consumption is higher than what was feasible for each of them as a single (q + q*). ɜ Utility function: V(g, q) Budget constraint: U(e + h – g – q, q) ≥ U r r r where U = reservation utility for marrying him, U ≥ U* or she will not marry him h = father’s endowment g = father’s consumption Father’s optimization problem L(g, q, λ) = V(g, q) + λ(U(e + h – g – q, q) – U ) r Solution V-hat q (U-hat /Uqhat )V-cat = Vghat g FREE RIDING WITHIN A HOUSEHOLD Non-cooperative parents allocate too little consumption to their children relative to cooperating parents EFFICIENCY WITH REPEATED PARENT INTERACTION Lundberg Pollak Wales Do husbands and wives pool their resources? In this paper, we present an alternative test based on a “natural experiment” – a policy change in the United Kingdom that transferred a substantial child allowance to wives in the late 1970s. Using Family Expenditure Survey data, we find strong evidence that a shift toward greater expenditures on women’s clothing and children’s clothing relative to men’s clothing coincided with this income redistribution. A unitary model of family behavior predicts that such a shift in the child allowance policy would have no effect on consumption patterns, while an individual preference model predicts that consumption may shift toward goods more highly valued or private to, the spouse receiving the child allowance. Thus, one could test the pooling hypothesis by comparing expenditure patterns before and after the policy change. We break the sample into 3 periods: 1973-1976 to represent the consumption regime before the policy change, drop the intermediate years 1977-79, and use the period 1980-90 to represent the regime after the policy change. The FES provides data on expenditures on women’s, men’s, and children’s clothing. Table 3 (pg. 9/19) shows that the means of both these ratios (children’s clothing to current expenditures on men’s clothing; women’s clothing to current expenditures on men’s clothing) are higher in the period after the policy change than in the period before the policy change, at least for families with more than one child. Holding constant total family income, the income received by each spouse has substantial and significant effects on family expenditure patterns. These findings are consistent with the notion that children do better when their mothers control a larger fraction of family resources. This is evidence for the Collective Model of the Family. Duflo This paper studies whether the impact of a cash transfer on child nutritional status is affected by the gender of its recipient. My estimates suggest that pensions received by women had a large impact on the anthropometric status of girls (it improved their weight given height by 1.19 standard deviations and their height given age by 1.16 standard deviations), but little effect on that of boys. In contrast I found no similar effect for pensions received by men (not associated). This suggests that the household does not function as a unitary entity, and that the efficiency of public transfer programs may depend on the gender of the recipient. Low levels of investment in child health therefore have far-reaching consequences on economic growth, distribution, and welfare. The evidence suggests that, compared to income or assets in the hands of men, income or assets in the hands of women are associated with larger improvements in child health. An example of such a change is the expansion of the South African Old Age Pension program – a universal, non-contributory, age-tested and means-tested scheme (one of the few successful cash transfer programs in the developing world). At the end of the Apartheid era, the government committed to achieving parity of benefits and eligibility requirements for Whites and Blacks. This was achieved mostly by increasing the benefits received by the Africans. All women above 60 and men above 65 are entitled to benefits, subject to a means test (370 rands per month). Living arrangements in South Africa are such that grandparents often live in extended households, with their children and grandchildren. This paper addresses this identification problem in two steps. First, I compare a flow measure of nutritional status, weight for height, of children living in households where there is no eligible members, households where there is an eligible man, and households where there is an eligible woman, after controlling for the presence of a man or woman who is old, but not old enough to be eligible. In a second step, I make use of the fact that height for age reflects past as well as current investments. If the pension had an effect, children born after the expansion of the program have spent a larger fraction of their lives well-nourished if they live with a pension recipient. Thus, I compare the differences in height between young children and older children across households, according to whether there is an age-qualified woman, an age-qualified man, or no eligible member living in the household. A permanent shock to the non-labor income of a household member that was not expected at the time of household formation can be used to test the unitary model of the household. Weight for height of children reflects short run nutrition and illnesses and recovers quickly after periods of malnutrition when proper nutrition is resumed. RESULTS: For girls, the coefficient is positive, but insignificant without controlling for the presence of non- eligible members above 50. The controls are introduced, the coefficient more than doubles, and becomes significant. The evidence points in the direction of rejecting the unitary model of the household. CAVEATS (POTENTIAL PROBLEMS): 1. The presence of an elderly grandparent may actually be the sign of a relatively healthy household: The grandmother is old, which indicates that she, the mother, or both, did not have children very early. In addition, she is old but still alive, which could indicate that household members are, in general, healthy. 2. The pension program led to changes in the composition of the household. Endogenous household composition could create a positive correlation between unobserved characteristics of the household and the presence of an eligible member. A difference between the coefficient of a woman’s and a man’s pension could then be obtained even with the absence of any causal effect of the additional income on nutrition. Family composition may have changed as a result of the program, and this could invalidate the identification strategy proposed in this paper, if families where children are more (or less) likely to send their children to live with their grandparents or to have the grandparents with them. These could be addressed by comparing health status in household with or without eligible members, before and after the expansion of the program. There were no representative surveys of Black households before the end of Apartheid. However, we can take advantage of the fact that height is a stock, which reflects accumulated investment in child health and nutrition since birth. The basic idea of the identification strategy is thus to compare the differences between the height of children in eligible and in non-eligible households and between children exposed to the program for a fraction of their lives and children exposed all their lives. For girls, living with an eligible member is associated with an increase of 0.68 standard deviations in height for age, with control variables. For boys, the effect of eligibility is small (0.11) and not significant. Two interpretations of this difference are possible. The first interpretation is that the same resources are spent differently when they are received by a woman and when they are received by a man. Another interpretation, however, could be that, in terms of permanent income, a rand of pension received by a man represents much less than a rand of pension received by a woman because men are expected to receive the pension for a shorter time. The point estimates suggest that the propensity to save out of a man’s pension income is actually lower than the propensity to save out of a woman’s non-pension income. Differences not likely to be due to their different life cycle properties. Li, Rosenzweig, and Zhang (sophie’s choice) - The key distinction between altruism and guilt is that for the former the utility of the age
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