On measuring the cost of children

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The primary objectives of this paper are to give a precise definition of the costs of a child and to compare various approaches in the literature to estimating these costs. Two alternative approaches are discussed at length. The first goes back to the work of Engel (1895) on household consumption patterns. The second is based on methods to directly estimate Individual Welfare Functions of Income (van Praag, 1968). Both approaches produce well-defined measures of levels of well-being. These measures are adopted to define the cost of a child. We will show that both approaches can be viewed as stemming from the same general methodological framework. A short discussion of methodologies that do not fit this framework is included. It is concluded that there exists in the literature no consensus on the exact value of the cost of a child. The estimates for a first child range from 0–42% of a household's yearly income. However, the century-long development of this topic in the economic literature has produced a precise definition of the cost of a child that—once adopted—will enable researchers to improve their estimates and narrow down this disappointingly wide range.