The quantity-quality tradeoff: a cross-country comparison of market and nonmarket investments per child in relation to fertility

Lili Vargha, Hungarian Demographic Research Institute
Gretchen Donehower, University of California, Berkeley

The aim of this paper is to show how various investments in children are related to fertility in a cross-national comparative context. Following the extended theoretical treatment of investment in child quality, we consider quality as produced not only by market goods and services but by inputs of time as well. We provide proxies that combine public and private market expenditure on children with the value of time devoted to childcare and other household services provided by mostly parents and grandparents at home and consumed by children. Our measures are based on the National Transfer Accounts (NTA), which disaggregates national accounts by age; as extended by the National Time Transfer Accounts (NTTA), which estimate the same quantities for unpaid household labour activities using time use surveys. We quantify total spending per child and a narrower concept of human capital investment per child, which includes expenditure on education and health as well as the value of nonmarket childcare. The proxies are calculated in cross-sections for more than 25 countries across the globe and their relations with fertility are analyzed. Our preliminary results show a significant negative association between fertility and total human capital investment per child. Moreover, a significant but weaker relation is also found between fertility and total spending per child across the countries.