Does fertility decrease household consumption?

Abstract

This paper presents an empirical analysis of the relationship between fertility and poverty for Indonesia, a country which has experienced unprecedented economic growth and sharp fertility decline over recent decades. We illustrate the sensitivity of the effect of fertility on household consumption with respect to the equivalence scale in a unitary household framework. Using the propensity score matching method, the analysis suggests that a newborn child decreases household consumption per person by 20 percent within four years. When the estimates of equivalence scales implied by the Indonesian sample are applied, the effect of a child on household consumption is still negative, but the magnitudes are in the range of 20 to 65 percent of that found with the per-capita expenditure as a measure of consumption. Therefore, it is suggested that analysis based on the conventional measure of poverty is likely to exaggerate the effect of fertility on poverty at least because of neglect of the proper equivalence scale. Given that household preference for consumption of private goods such as children's education is negatively associated with fertility, the test for household bargaining supports the model of the unitary household as a valid assumption for examining the relationship between fertility and household consumption.