IDEAS home Printed from https://ideas.repec.org/a/bla/ecorec/v91y2015is1p139-150.html
   My bibliography  Save this article

The Impact of Children on Australian Couples’ Wealth Accumulation

Author

Listed:
  • Alfred Michael Dockery
  • Sherry Bawa

Abstract

Existing estimates of the cost of children focus on what parents spend on their children, which has limited relevance to parents’ financial capacity to meet those costs. An alternative indicator of the affordability of children, their impact upon couples’ wealth accumulation, is estimated using the lifecycle model and Australian household panel data. The results suggest children have a very small impact upon wealth accumulation, seemingly at odds with the large ‘costs’ implied from expenditure‐based estimates. In reconciling these highly divergent estimates we argue that the net‐wealth approach is an intuitively more appealing indicator of the financial impost of children.

Suggested Citation

  • Alfred Michael Dockery & Sherry Bawa, 2015. "The Impact of Children on Australian Couples’ Wealth Accumulation," The Economic Record, The Economic Society of Australia, vol. 91(S1), pages 139-150, June.
    • Handle: RePEc:bla:ecorec:v:91:y:2015:i:s1:p:139-150
    DOI: 10.1111/1475-4932.12194
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1475-4932.12194
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1475-4932.12194?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:pri:cheawb:case_paxson_economic_status_paper is not listed on IDEAS
    2. Modigliani, Franco, 1986. "Life Cycle, Individual Thrift, and the Wealth of Nations," American Economic Review, American Economic Association, vol. 76(3), pages 297-313, June.
    3. Nicole Watson & Mark Wooden, 2010. "Data Survey: The HILDA Survey: Progress and Future Developments," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(3), pages 326-336, September.
    4. Banks, James & Blundell, Richard & Preston, Ian, 1994. "Life-cycle expenditure allocations and the consumption costs of children," European Economic Review, Elsevier, vol. 38(7), pages 1391-1410, August.
    5. M. Luisa Ferreira & Reuben C. Buse & Jean‐Paul Chavas, 1998. "Is There Bias In Computing Household Equivalence Scales?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(2), pages 183-198, June.
    6. Martin Browning & Mette Ejrnæs, 2009. "Consumption and Children," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 93-111, February.
    7. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
    8. Bruce Bradbury, 2008. "Time And The Cost Of Children," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(3), pages 305-323, September.
    9. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall.
    10. repec:bla:revinw:v:44:y:1998:i:2:p:183-98 is not listed on IDEAS
    11. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6, National Bureau of Economic Research, Inc.
    12. repec:pri:cheawb:case_paxson_economic_status_paper.pdf is not listed on IDEAS
    13. Matthew Gray & David Stanton, 2010. "Costs of children and Equivalence Scales: A Review of Methodological Issues and Australian Estimates," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 13(1), pages 99-115.
    14. Deaton, Angus S & Muellbauer, John, 1986. "On Measuring Child Costs: With Applications to Poor Countries," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 720-744, August.
    15. Peter Saunders, 1999. "Budget Standards and the Poverty Line," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 32(1), pages 43-61, March.
    16. Pollak, Robert A & Wales, Terence J, 1979. "Welfare Comparisons and Equivalence Scales," American Economic Review, American Economic Association, vol. 69(2), pages 216-221, May.
    17. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    18. Anne Case & Darren Lubotsky & Christina Paxson, 2002. "Economic Status and Health in Childhood: The Origins of the Gradient," American Economic Review, American Economic Association, vol. 92(5), pages 1308-1334, December.
    19. Trevor Breusch & Edith Gray, 2004. "New Estimates of Mothers’ Forgone Earnings Using HILDA Data," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 7(2), pages 125-150, June.
    20. Angus Deaton, 2005. "Franco Modigliani and the life-cycle theory of consumption," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 91-107.
    21. Geoffrey Lancaster & Ranjan Ray, 1998. "Comparison of Alternative Models of Household Equivalence Scales: The Australian Evidence on Unit Record Data," The Economic Record, The Economic Society of Australia, vol. 74(224), pages 1-14, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michelle Maroto, 2018. "Saving, Sharing, or Spending? The Wealth Consequences of Raising Children," Demography, Springer;Population Association of America (PAA), vol. 55(6), pages 2257-2282, December.
    2. Zachary Winkle & Christiaan Monden, 2022. "Family Size and Parental Wealth: The Role of Family Transfers in Europe," European Journal of Population, Springer;European Association for Population Studies, vol. 38(3), pages 401-428, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Qazi-Muhammad Adnan Hye & Wee-Yeap Lau, 2018. "Does Financial and Trade Liberalization Drive Private Savings in Pakistan?," Asian Development Policy Review, Asian Economic and Social Society, vol. 6(4), pages 198-212, December.
    2. White, Howard & Masset, Edoardo, 2002. "Child poverty in Vietnam: using adult equivalence scales to estimate income-poverty for different age groups," MPRA Paper 777, University Library of Munich, Germany.
    3. Garcia-Diaz Rocio, 2012. "Demand-Based Cost-of-Children Estimates and Child Poverty," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-32, January.
    4. Tess Penne & Tine Hufkens & Tim Goedeme & Berenice M L Storms, 2018. "To what extent do welfare states compensate for the cost of children? A hypothetical household approach to policy evaluations," JRC Working Papers on Taxation & Structural Reforms 2018-08, Joint Research Centre.
    5. Christian Dudel & Julian Schmied, 2019. "Pension adequacy standards: an empirical estimation strategy and results for the United States and Germany," MPIDR Working Papers WP-2019-003, Max Planck Institute for Demographic Research, Rostock, Germany.
    6. Howard Bodenhorn, 2019. "Were Nineteenth‐Century Industrial Workers Permanent Income Savers?," Southern Economic Journal, John Wiley & Sons, vol. 85(4), pages 1286-1310, April.
    7. Alice Martini & Luca Spataro, 2022. "The contribution of Carlo Casarosa on the forerunners of the life cycle hypothesis by Franco Modigliani and Richard Brumberg," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 69(1), pages 71-101, March.
    8. Jacinta C. Nwachukwu, 2017. "Tenure and Spending Within UK Households at the End of the Recent Recession," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(3), pages 1075-1104, September.
    9. Klos, Alexander & Rottke, Simon, 2013. "Saving and Consumption When Children Move Out," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79786, Verein für Socialpolitik / German Economic Association.
    10. Magdalena Osinska & Kinga Wasilewska, 2020. "Students’ Attitudes Towards Savings and Investment: The Case of Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 2), pages 1068-1085.
    11. Evren Ceritoglu, 2017. "The effect of house price changes on cohort consumption in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 17(3), pages 1-99–110.
    12. Mario Cerrato & Christian De Peretti & Chris Stewart, 2013. "Is The Consumption–Income Ratio Stationary? Evidence From Linear And Non-Linear Panel Unit Root Tests For Oecd And Non-Oecd Countries," Manchester School, University of Manchester, vol. 81(1), pages 102-120, January.
    13. Evelyn Forget, 2010. "Margaret Gilpen Reid," Chapters, in: Ross B. Emmett (ed.), The Elgar Companion to the Chicago School of Economics, chapter 13, Edward Elgar Publishing.
    14. Thomas F. Crossley & Krishna Pendakur, 2002. "Consumption Inequality," Department of Economics Working Papers 2002-09, McMaster University.
    15. Twum-Barima, Asare, 2015. "Household Consumption Response to Demographic Changes: An Analysis using a Demographic Model," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205881, Agricultural and Applied Economics Association.
    16. Hettihewa, Samanthala & Saha, Shrabani & Zhang, Hanxiong, 2018. "Does an aging population influence stock markets? Evidence from New Zealand," Economic Modelling, Elsevier, vol. 75(C), pages 142-158.
    17. Saten Kumar, 2016. "Is the US Consumer Credit Asymmetric?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(2), pages 194-215, May.
    18. John Foster, 2021. "The US consumption function: a new perspective," Journal of Evolutionary Economics, Springer, vol. 31(3), pages 773-798, July.
    19. Apps, Patricia & Rees, Ray, 2004. "Life Cycle Time Allocation and Saving in an Imperfect Capital Market," IZA Discussion Papers 1036, Institute of Labor Economics (IZA).
    20. Bokana K.G & Kabongo W.N.S, 2018. "Modelling Real Private Consumption Expenditure in South Africa to Test the Absolute Income Hypothesis," Journal of Economics and Behavioral Studies, AMH International, vol. 10(5), pages 138-155.

    More about this item

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ecorec:v:91:y:2015:i:s1:p:139-150. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/esausea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.