Do parents have ‘property rights’ over their children?
Policy-makers often argue that lowering fertility rates in poor countries could lead to increased economic growth. At the same time, many governments in more prosperous countries have become concerned about low fertility rates and their implication for the solvency of pension systems.
Can and should active fertility policy such as child-care provision, subsidies and parental leaves alleviate these pressures and if so, what is the best way to do this? Can and should immigration policy be used as a substitute for high domestic fertility?
Dr Alice Schoonbroodt from Southampton and Professor Michèle Tertilt from Stanford University are working on a joint research project which investigates the frictions that can lead to inefficiently high or low fertility in equilibrium. They believe the main issue may lie in the property rights over children’s labour.
There are two schools of thought here. One pursues a distinction between formal rights and effective rights. The idea is that when markets are missing (e.g. labour market, land market, housing market), then children have few outside options (e.g. to work for someone else rather than on the parents’ farm), so even when parents do not formally own children, effectively they do. To date there is a simple example showing that missing labour markets in agricultural economies generate inefficiently high fertility along with inefficient labour allocations.
Other missing markets which the research project will analyse include credit markets affecting housing and education choices, and annuity markets affecting savings choices.
Through the process of development, these markets are now widely available and functioning well, which increases outside options for children and thereby effectively increases their rights. This in turn decreases the benefit of child-rearing to parents and lowers fertility.
There is a limit to this kind of argument, though, since it seems unlikely that a four year old would take advantage of such outside opportunities. Hence the second alternative is that property rights are determined by policy-makers.
Dr Schoonbroodt and Professor Tertilt can show that equilibrium fertility may be inefficiently low, when parents do not have full property rights over their children. The inefficiency is caused by the non-existence of a market in which parents and unborn children can make trades. Of course such a market can never exist due to the inter-temporal nature of fertility. Concretely, if parents have property rights over children, the costs and benefits of producing new people are aligned and equilibria are generally efficient. On the other hand, if property rights are allocated to the children themselves, costs and benefits are borne by different people and inefficiency may result. Because children who are not born yet cannot negotiate and promise compensation, when property rights are allocated to children, fertility might be inefficiently low.
However, even when children’s rights lead to inefficiently low fertility, these rights might still be desirable. Different government policies to solve the inefficiency are explored.
One way of restoring efficiency without infringing on the sovereignty of children is to implement a pay-as-you-go pension system where payments depend on the number of children. Such a policy might be problematic when fertility has a stochastic component and may need provisions for involuntary infertility.
After showing the theoretical results, the researchers intend to explore how such property rights are allocated in reality. It is known that there is a tremendous amount of variety in the “ownership” of children both across cultures and over time. They document how over time children have gained rights and parents have lost rights. Examples include the decline in age of majority, the introduction of laws banning child labour, as well as the rise of social welfare programs allowing governments to take (abused) children away from their parents.
Whether today children have gained so many rights such that fertility is indeed inefficiently low is ultimately an empirical question. As long as positive (non-accidental) bequests to children are observed, the constraint that parents cannot force their children to compensate them for the cost of child-rearing cannot be binding. One way to test this, for example, is to see whether countries with low fertility are also countries where bequests are small. If this is the case, it seems plausible that fertility might indeed be inefficiently low in these countries today.