Revisiting the cost of children : theory and evidence from Ireland

In this paper, we suggest a collective model with parents and (young)
children. We identify and estimate scale economies in households and the
sharing rule between husband, wife and children. While adult shares and
economies of scale are identi…ed thanks to the estimation of individual Engel
curves on single individuals, the identi…cation of the resource share accruing
to children (the cost of children) requires the observation of adult-speci…c
goods as in the traditional Rothbarth method. The useful aspect of the
present approach is that it requires only the estimation of Engel curves on
cross-sectional data, i.e. price variation is not required. This is an advan-
tage for many countries where price variations is indeed limited, as in our
application on Irish data.