Child as a (partly) positional good

Abstract

One of the defining characteristics of modern societies is the negative relationship between fertility and income. There are many root causes behind this phenomenon, this study argues that fertility can have a context-dependent, positional aspect, where the utility derived from having and raising children depends to a

certain extent on the status and success of the offspring within the community. All of this can result in parents holding back on fertility, because insufficient time and financial investments would hinder the offspring from achieving the desired social status. To explore this effect, we introduce a formal model according to which there is a negative relationship between income and fertility when households place high importance on the positional elements of childbearing and believe that the socio-economic status of the child increases with increased parental effort can be improved. The results also indicate that it is not only the quality of the offspring that is important to parents, but also how quality is related to social status.