The Value of Time and the Interaction of the Quantity and the Quality of Children

Based on Becker's (1965) insight that consumption is costly in terms of both time and money, this paper extends the existing literature by assuming that the consumption of quantities is relatively time-intensive, while the consumption of qualities is relatively money-intensive. The analysis implies that the quantity of children is positively correlated with income only when incomes are relatively low. When people's incomes increase to a certain threshold level, fertility rate will decrease and will ultimately approach to a certain stable level as incomes rise. On the other hand, the analysis implies that the quality of children is not strongly correlated with income with incomes are low. However, when people's incomes reach a certain threshold level, further income increases will mainly lead to the increases of quality, rather than quantity, of children. Thus, this paper provides a unified theory that simultaneously explains why fertility is positively correlated with income when people's incomes are relatively low and why only the quality, but not the quantity, of children is positively correlated with income when people's incomes are relatively high.