Provides estimates of effects of children on asset accumulation, asset composition, consumption, and family income. The net effect of young children is to depress savings for young families, but to increase savings for marriages of duration greater than five years. The analysis shows that conventional wisdom associating larger families with higher consumption is incorrect. The way that children reduce savings is through decline in female earnings. Family consumption actually decreases with the birth of a child but this reduction is insufficient to offset the fall in family income. For the more traditional economic determinants of savings and consumption, the results are consistent with earlier findings. The marginal propensity to consume out of permanent male income is approximately .89, while out of transitory income it is between .50 and .30. The study offers new evidence that a family's response to changes in husband's income varies systematically with marriage duration.
This report is part of the RAND Corporation Note series. The note was a product of the RAND Corporation from 1979 to 1993 that reported other outputs of sponsored research for general distribution.
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