Children and Household Wealth

44 Pages Posted: 22 Feb 2008

See all articles by John Karl Scholz

John Karl Scholz

University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

Ananth Seshadri

University of Wisconsin - Madison - Department of Economics

Date Written: October 1, 2007

Abstract

This paper examines the effects of children on consumption and wealth. To anchor intuition, we develop implications using a simple permanent income model with no uncertainty and complete markets. But this framework does not come close to matching the distribution of existing wealth. We therefore examine the effects of children using a rich, augmented life-cycle model, and using a life-cycle model with endogenous fertility. We find that children have a large effect on household's net worth and consequently are an important factor in understanding the wealth distribution. The effects of children are much larger than the effects of asset tests associated with cash and near-cash transfers, given earnings realizations and the social security system experienced by households in the original HRS cohort. We also show that fertility and credit constraints interact in ways that significantly affect wealth accumulation.

Suggested Citation

Scholz, John Karl and Seshadri, Ananth, Children and Household Wealth (October 1, 2007). Michigan Retirement Research Center Research Paper No. WP 2007-158, Available at SSRN: https://ssrn.com/abstract=1083829 or http://dx.doi.org/10.2139/ssrn.1083829

John Karl Scholz

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States
608-262-5380 (Phone)
608-262-2033 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ananth Seshadri (Contact Author)

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States
608-262-6196 (Phone)
608-263-3876 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
361
Abstract Views
2,320
rank
104,721
PlumX Metrics