Analyzing the Effect of Family Size on Parental Health Production - Evidence from Indonesia

Abstract: The most famous theory of family economics is probably Gary Becker’s Quantity-Quality model. Assuming scarce parental resources, it predicts a negative relationship between family size and adult success. The model assumes that parents have common preferences and that income pooling takes place. However, modern theories of household allocation have shown that the assumption of common preferences is not necessarily valid and that, instead, a bargaining process takes place between the parents. This gives reason to believe that the mother and father might be affected differently to changes within the family, such as family size. To model this, the theoretical part of this thesis combines the Quantity-Quality model with theories of household allocation and hypothesizes that one can test the effect of family size on investment in parental ‘quality’, which in this thesis is interpreted as the level of ‘good health’. To do this, it uses the Grossman models of individual and family health production, which view health as a durable stock that produces healthy time, as models of how parents can invest to increase their own ‘quality’. The empirical part of this thesis uses data from Indonesia to test the relationship between parents’ health levels and family size by using blood pressure as the health variable. The result from the econometric analysis is that an increase in the number of daughters living at home in the household is associated with an increase in blood pressure for the mothers but not the fathers, and therefore a special type of Quantity-Quality relationship is found. The findings also reject the common preference assumption and support the bargaining models of household allocation. Finally, the results suggest that the wife has a weaker bargaining strength in the household and therefore bears most of the cost of having children but that this cost is only associated with daughters and not for sons. This can be due to poor opportunities for women in the labor market or the sign of a gender bias of the mother towards the daughters living in the household. Finally, the results of this thesis support policies that aim at reducing fertility and/or increasing women’s position in society but does not evaluate which of the alternative policies that is the best.