Diversification in Children

This paper develops a dynamic model of the decisions regarding the quantity and quality of children, predicated on two premises: (1) the quality of children is uncertain when parents make a human capital investment decision, and (2) the quality distributions of two children of a woman are less correlated if they are farthered by different men than by the same man, as the result of either (or both) genetic inheritance or father-specific training. It follows logically that a parent seeks to hedge the risk of children quality by having childrent fathered by different men, or by diversifying their portfolio of children. We derive and test discriminating propositions concerning chlid diversification and human capital investment in children. Consistent with these propositions, our empirical results show that women with less education, more income, and higher degrees of income uncertainty are more likely to diversify. We also demonstrate that human capital investment in a child fathered by a new mate is lower, and that higher degrees of income uncertainty increase investment.Fertility, Quality of Children, Human capital, Diversification