Abstract
The effects and optimal choice of policy instruments directly affecting the welfare of parents and children are examined within the context of a household economics model. If fertility were exogenous, and households differed in number of children only, a first best could be implement through a grant conditional on family size. Outside this very special case, public intervention is either not justifiable on distributional grounds, or involves taxing child-specific commodities less than adult-specific commodities. If fertility is endogenous, family size must be taxed or subsidized according to whether household expenditure on children is decreasing or increasing in the mother’s wage rate.
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