Parental Behavior and the Value of Children's Health: A Health Production Approach

Data on individual children and on sibling pairs are used to examine how family resource allocations affect children's health and to estimate willingness to pay for reduced acute illness in children. Results highlight the importance of accounting for the endogeneity of child health and suggest that children with greater stocks of health capital whose parents invest in preventive and remedial medical care experience fewer days of illness. Estimated willingness to pay to avoid one day of illness‐induced school loss is about $100 to $150, a range broadly consistent with limited prior evidence but substantially more than unit values applied in recent policy analyses. All else equal, willingness to pay is higher among single parents and for uninsured children, and the estimated income elasticity is only 0.14. Implied aggregate benefits of reductions in children's sick time associated with air pollution control may be substantial.