Children are costly, but raising them may pay

Objective: This article provides a non-technical introduction to analyses of fertility which are based on a rational-choice paradigm and which acknowledge that raising children may have a strong impact on the well-being of parents that can be described in terms of costs and benefits. It surveys different types of economic fertility models which can be used to address a variety of research questions, and it also discusses some basic strengths and weaknesses of applying economic analyses in this particular field. Results: Starting from a seminal contribution by Becker (1960) which may have been of little use for applied research or for interdisciplinary work, the economic theory of fertility has unfolded a differentiated research programme with indispensable contributions to the broader field of fertility research. Important features are the inclusion of (i) different bargaining positions and differing incentives of partners interacting in fertility choices; (ii) simultaneous decisions regarding labour force participation (as well as education) and fertility, and the role played by employers, labour market institutions, and other public interventions; (iii) the idea that children (or their “human capital”) are investment goods with various kinds of returns that may be dispersed over an extremely long period of time, are subject to enormous uncertainties, and are strongly influenced by the social context and, again, by public policies. Conclusions: Economic aspects and elements of economic models should be included in any large-scale attempt at understanding fertility behaviour through interdisciplinary research. Improvements in the data infrastructure, which are only partly underway thus far, would be an important pre-requisite.