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A comparison and latent variable test of two fertile ideas

Abstract

Perhaps the two most important recent strands in the economics of fertility have been developed by Becker and Easterlin. Both suggest possible biases due to unobserved variables. Becker earlier emphasized changing shadow prices for child quantity and quality and, more recently, intergenerational serially-correlated endowments, all with given preferences. Easterlin has focused on intergenerational serially-correlated preferences. Some demographers have suggested that the Becker and Easterlin approaches are converging and may not be identified from each other.

We demonstrate that while the Becker endowment and Easterlin taste models can be expressed in terms of the same variables, it is possible to identify each of the models because of different signs in a latent variable system that uses information from individuals, siblings, and cousins. Estimates of this model are consistent with the Easterlin, but not the Becker formulation. But neither model results in significant income coefficient estimates.

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The authors thank NIH for research support and Alan Mathios for excellent research assistance. The usual disclaimer applies.

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Behrman, J.R., Taubman, P. A comparison and latent variable test of two fertile ideas. J Popul Econ 3, 19–30 (1990). https://doi.org/10.1007/BF00160415

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  • DOI: https://doi.org/10.1007/BF00160415

Keywords

  • Variable System
  • Coefficient Estimate
  • Variable Test
  • Significant Income
  • Unobserved Variable