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.