Better educated parents invest more time and
money in their children, who are more successful in the labor market
Governments invest a lot of money in education,
so it is important to understand the benefits of this spending. One
essential aspect is that education can potentially make people better
parents and thus improve the educational and employment outcomes of their
children. Interventions that encourage the educational attainment of
children from poorer families will reduce inequality in current and future
generations. In addition to purely formal education, much less expensive
interventions to improve parenting skills, such as parental involvement
programs in schools, may also improve child development.
Government policies can have a modest effect on
raising fertility—but broader social changes lowering fertility are
Since 1989 fertility and family formation have
declined sharply in Central and Eastern Europe and the former Soviet Union.
Fertility rates are converging on—and sometimes falling below—rates in
Western Europe, most of which are below replacement levels. Concerned about
a shrinking and aging population and strains on pension systems, governments
are using incentives to encourage people to have more children. These
policies seem only modestly effective in countering the impacts of
widespread social changes, including new work opportunities for women and
stronger incentives to invest in education.
What are the implications of childcare subsidies
for care quality, family well-being, and child development?
Most public expenditure on childcare in the US
is made through a federal program, the Child Care and Development Fund
(CCDF), established as
part of landmark welfare reform legislation in 1996.
The main goal of the reform was to increase employment and reduce welfare
dependence among low-income families. Childcare subsidies have been
effective in enabling parents to work, but apparently at some cost to the
well-being of parents and children.
Inheritance-related work disincentives can be
strong, but labor supply could increase if bequests facilitate
Inheriting money can be a problem since the new
wealth might sap the beneficiaries’ incentive to work. Or it could do the
opposite, by facilitating entrepreneurship among those whose ambition to
start a business had been stymied by a lack of cash. Recent evidence
suggests inheritance-related work disincentives can be strong—unexpected
inheritances can matter a lot for early retirement, for example. But where
inheritances facilitate self-employment, as some evidence suggests, the
labor supply might increase.
Investing in female human capital can reduce
brideprice and dowry practices and increase welfare
Payments at the time of marriage, which are
ubiquitous in developing countries, can be substantial enough to impoverish
parents. Brideprice and dowry have both been linked to domestic violence
against women, and inflation in these payments has prompted legislation
against them in several jurisdictions. Marriage payments are often a
substitute for investment in female human capital, so from a welfare and
policy perspective, they should be prohibited. This highlights the
importance of promoting direct economic returns over legal and customary
The evidence, though weak, favors legal, easy,
Many countries have enacted legislation over the
past few decades making divorce easier. Some countries have legalized
divorce where it had previously been banned, and many have eased the
conditions required for a divorce, such as allowing unilateral divorce (both
spouses do not have to agree on the divorce). Divorce laws can regulate the
grounds for divorce, division of property, child custody, and child support
or maintenance payments. Reforms can have a range of social effects beyond
increasing the divorce rate. They can influence female labor supply,
marriage and fertility rates, child well-being, household saving, and even
domestic violence and crime.
Universal early education can be beneficial, and
more so for the poor, but quality matters
There is widespread interest in universal early
education, both to promote child development and to support maternal
employment. Positive long-term findings from small-scale early education
interventions for low-income children in the US have greatly influenced the
public discussion. However, such findings may be of limited value for
policymakers considering larger-scale, more widely accessible programs.
Instead, the best insight into the potential impacts of universal early
education comes from analysis of these programs themselves, operating at
scale. This growing research base suggests that universal early education
can benefit both children and families, but quality matters.
Postponed childbearing increases women’s labor
market attachment but may reduce overall fertility
The rise in the average age of women bearing
their first child is a well-established demographic trend in recent decades.
Postponed childbearing can have important consequences for the mother and,
at a macro level, for the country as a whole. Research has focused on the
effect postponing fertility has on the labor market outcomes for mothers and
on the total number of children a woman has in her lifetime. Most research
finds that postponing the first birth raises a mother’s labor force
participation and wages but may have negative effects on overall fertility,
especially in the absence of supportive family-friendly policies.
Patterns of labor market assimilation for
married immigrant women are similar to those for men
What is the role of married women in immigrant
households? Their contribution to the labor market has traditionally been
considered of secondary importance and studied in the framework of temporary
attachment to the labor force to support the household around the time of
arrival. But this role has changed. Evidence from major immigrant-receiving
countries suggests that married immigrant women make labor supply decisions
similar to those recently observed for native-born married women, who are
guided by their own opportunities in the labor market rather than by their
spouses’ employment trajectories.
Knowing the real cost of children is important
for crafting better
The cost of children is a critical parameter
used in determining many economic policies. For instance, correctly setting
the tax deduction for families with children requires assessing the true
household cost of children. Evaluating child poverty at the individual level
requires making a clear distinction between the share of family resources
received by children and that received by parents. The standard ad hoc
measures (equivalence scales) used in official publications to measure the
cost of children are arbitrary and are not informed by any economic theory.
However, economists have developed methods that are grounded in economic
theory and can replace ad hoc measures.