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The Optimal Trade-Off Between Quality and Quantity with Unknown Number of Survivors

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  • THOMAS BAUDIN

Abstract

In a model of endogenous fertility where individuals know the probability of child survival but not the final number of survivors, parents do not always formulate a precautionary demand for children. For some utility functions, parents have fewer children than what they would have in a situation in which the number of survivors is known earlier. The properties of the optimal economic policy depend on the degree to which the social welfare function takes ignorance into account. If social welfare is evaluated after parents know how many children survived, the parental response to uncertainty is socially inefficient. Individual decisions then should be corrected through tax or transfer on both births and education. This property helps determine the optimal public response to mortality crisis in the presence of educational externalities.

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  • Thomas Baudin, 2012. "The Optimal Trade-Off Between Quality and Quantity with Unknown Number of Survivors," Mathematical Population Studies, Taylor & Francis Journals, vol. 19(2), pages 94-113, April.
    • Handle: RePEc:taf:mpopst:v:19:y:2012:i:2:p:94-113
    DOI: 10.1080/08898480.2012.666943
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