Children and Household Wealth

TitleChildren and Household Wealth
Publication TypeReport
Year of Publication2007
AuthorsScholz, JKarl, Seshadri, A
Series TitleMichigan Retirement Research Center Research Paper
Document Number2007-158
InstitutionMichigan Retirement Research Center, University of Michigan
CityAnn Arbor, MI
Call Numbernewpubs20080822_wp158
KeywordsAdult children, Net Worth and Assets

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.

Endnote Keywords

CHILDREN/Households/Wealth Accumulation

Endnote ID


Citation Key5687