by Ronald D. Lee and Timothy Miller
AbstractGovernment-financed family planning programs that assist individual couples to attain their desired number of children are easily justified. But government policies that coerce or use financial incentives to influence couples to alter their desired number of children require stronger justification. Such justification may reside in the externalities to childbearing -- the costs and benefits of children that are passed on by parents to society. Externalities to childbearing might include public costs of education, health, and pensions, as well as taxes to be paid by children in the future; cost sharing for public goods and social infrastructure over an enlarged tax base; the dilution of per capita value of various forms of collective wealth; and the reduction of wages and per capita income in the future. We estimate these externalities for a number of developing countries. Although the net total estimated externality was typically negative, it dominated measurement error only when public holdings of natural resources were important. Public expenditures on health, education, and pensions, financed by proportional taxes, led to negative externalities in most developing countries. There are many sources of positive and negative externalities, and each estimate is uncertain, so the total externality is itself highly uncertain and often does not provide a clear case for policies going beyond family planning. Inclusion of environmental effects might alter this conclusion.
Proceedings of the World Bank annual conference on development ecomomics, 1990, Washington, DC: The International Bank for Reconstruction and Development, 1991.