Testing economic model of child quality and quantity in a developing country

Neoclassical theory of consumer behavior posits a static framework for utility maximization from micro perspectives. The consumer is assumed to behave as if he maximizes a utility function subject to a set of non-stochastic restrictions like exogenous prices and predetermined income. Gary Becker and Gregg Lewis (1973) in their seminal article on child quality-quantity interaction applied this framework to the family size decision where they view children as economic goods. The basic proposition of their model is that an increase in the number of children (quantity) decreases the demand for child quality and vice versa through shadow price of quality per child. Both quality and quantity variables enter into the conscious parental decision making process; parents substitute between child quality and quantity, depending on market prices, income, child investment, and their own consumption. The present study seeks to test the validity of their model in a developing country with a rapidly growing population like Bangladesh. Accordingly, an economic model has been designed here in which one typically finds a utility function subject to an income constraint which might lead to two sets of relations: (i) reduced form demand equations in which right hand side variables are exogenous prices, income and community effects. (ii) conditional demand equations (dependent on family size). These all come out of one system with quality represented by different indices related to education and health. The most notable findings of this study are: (a) parental characteristics (proxies for exogenous prices) like parental education and mothers\u27 urban childhood have profound impact on demand for child quality (reduced form estimates). (b) an increase in the quantity of children does not exert pressure on education per child, reflecting basically that families in this sample of rural Bangladesh view quantity and one characteristic of children, i.e. education as complements, while quantity and child health are turned out to be marginally substitutes. This empirical regularity of positive association between child quality and quantity casts doubts about the validity of Becker and Lewis\u27 theory, at least currently in (two stage least squares estimates) this country. (c) Concerning community effects, six governmental programs were invoked and findings herein suggest that subsidy on family planning and primary health care for the poorer households will be the most effective in achieving harmonious objectives of reduced population growth (quantity) and enhanced human capital (quality)