Property Rights and Efficiency in OLG Models with Endogenous Fertility Alice Schoonbroodt 1 1 U. 2 U.
Michèle Tertilt2
of Iowa and CPC
of Mannheim, NBER and CEPR
Iowa State University April 2012
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Property rights over offspring’s labor income Who can legally (and feasibly) make decisions about a person/child as a resource?
the parents? the person/child? the government?
Clearly, a person cannot decide to be born.
Laws and cultural norms determine property rights
mandatory parental support;
parent’s control over offspring; allocation of power between generations.
Allocation of property rights matters for fertility choice. Missing market → fertility inefficiently low.
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An extreme example Measure 1 of potential parents live for 2 periods & solve: maxc m ,c o ,n,s
U P = ln(c m ) + β ln(c o ) s.t.
c m + θn + s = e, c o = rs.
Children in period 2, if alive, solve: maxc k
U k = ln(c k ) s.t.
c k = w.
Production in period 2: Y = K α L1−α
→
r = αk α−1 ,
w = (1 − α)k α ,
k = K /L.
Market clearing: K = s and L = n.
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An extreme example Measure 1 of potential parents live for 2 periods & solve: maxc m ,c o ,n,s
U P = ln(c m ) + β ln(c o ) s.t.
c m + θn + s = e, c o = rs.
Children in period 2, if alive, solve: maxc k
U k = ln(c k ) s.t.
c k = w.
Production in period 2: Y = K α L1−α
→
r = αk α−1 ,
w = (1 − α)k α ,
k = K /L.
Market clearing: K = s and L = n. In equilibrium,
n = 0 because child cost = θ, benefit = 0.
3 / 45
An extreme example Measure 1 of potential parents live for 2 periods & solve: maxc m ,c o ,n,s
U P = ln(c m ) + β ln(c o ) s.t.
c m + θn + s = e, c o = rs.
Children in period 2, if alive, solve: maxc k
U k = ln(c k ) s.t.
c k = w.
Production in period 2: Y = K α L1−α
→
r = αk α−1 ,
w = (1 − α)k α ,
k = K /L.
Market clearing: K = s and L = n. In equilibrium, ⇒
n = 0 because child cost = θ, benefit = 0. Y =0
⇒
co = 0
⇒
U P = −∞.
3 / 45
An extreme example Measure 1 of potential parents live for 2 periods & solve: maxc m ,c o ,n,s
U P = ln(c m ) + β ln(c o ) s.t.
c m + θn + s = e, c o = rs + ωn.
Children in period 2, if alive, solve: maxc k
U k = ln(c k ) s.t.
c k = w − ω.
Production in period 2: Y = K α L1−α
→
r = αk α−1 ,
w = (1 − α)k α ,
k = K /L.
Market clearing: K = s and L = n.
4 / 45
An extreme example Measure 1 of potential parents live for 2 periods & solve: maxc m ,c o ,n,s
U P = ln(c m ) + β ln(c o ) s.t.
c m + θn + s = e, c o = rs + ωn.
Children in period 2, if alive, solve: maxc k
U k = ln(c k ) s.t.
c k = w − ω.
Production in period 2: Y = K α L1−α
→
r = αk α−1 ,
w = (1 − α)k α ,
k = K /L.
Market clearing: K = s and L = n. In equilibrium,
n > 0 because return to children
ω θ
> 0.
Choice of s and n adjusts s.t. k = K /L = s/n gives r = ω/θ.
4 / 45
An extreme example Measure 1 of potential parents live for 2 periods & solve: maxc m ,c o ,n,s
U P = ln(c m ) + β ln(c o ) s.t.
c m + θn + s = e, c o = rs + ωn.
Children in period 2, if alive, solve: maxc k
U k = ln(c k ) s.t.
c k = w − ω.
Production in period 2: Y = K α L1−α
→
r = αk α−1 ,
w = (1 − α)k α ,
k = K /L.
Market clearing: K = s and L = n. In equilibrium, ⇒
n > 0 because return to children Y >0
⇒
co
>0
⇒
UP
ω θ
> 0.
> −∞.
If U k = ln (w − ω) > u(unborn), even children are better off. 4 / 45
What we do 1. From extreme example:
If property rights (PR) lie with children: fertility inefficiently low, i.e. fertility up, through PR shift → everyone better off.
5 / 45
What we do 1. From extreme example:
If property rights (PR) lie with children: fertility inefficiently low, i.e. fertility up, through PR shift → everyone better off.
2. Analyze general OLG model:
children are a consumption good, parents are altruistic, property rights: minimum transfer constraint, appropriate efficiency concept: A−efficiency
5 / 45
What we do 1. From extreme example:
If property rights (PR) lie with children: fertility inefficiently low, i.e. fertility up, through PR shift → everyone better off.
2. Analyze general OLG model:
children are a consumption good, parents are altruistic, property rights: minimum transfer constraint, appropriate efficiency concept: A−efficiency
Basic result: Equilibrium allocation A−efficient ⇔ parents are not transfer constrained.
5 / 45
What we do 1. From extreme example:
If property rights (PR) lie with children: fertility inefficiently low, i.e. fertility up, through PR shift → everyone better off.
2. Analyze general OLG model:
children are a consumption good, parents are altruistic, property rights: minimum transfer constraint, appropriate efficiency concept: A−efficiency
Basic result: Equilibrium allocation A−efficient ⇔ parents are not transfer constrained. 3. Revisit previous efficiency results in OLG. 4. Policy implications 5 / 45
What we do 3. Revisit previous efficiency results in OLG. no altruism
with altruism
exogenous fertility
endogenous fertility
Samuelson (1958),
Michel, Wigniolle (2007),
Cass (1972),
Conde-Ruiz, Giménez and
Balasko and Shell (1980)
Pérez-Nievas (2004)
(r > n) nec. & suff. for PO
(r > n) not suff. for M−efficiency (r > w /θ) suff. for M−efficiency
Barro (1974),
Pazner and Razin (1979)
Burbidge (1983)
(r > n) always, “efficient”
“operative transfers” nec. & suff for PO
This Paper:
Non-altruistic models implicity assume children have PR. Altruistic models often implicitly assume parents have PR.
Property rights & fertility: key dimension not analyzed before! 6 / 45
What we do 1. Extreme example. 2. Analyze general OLG model. 3. Revisit previous efficiency results in OLG. 4. Policy implications:
PAYG pension:
relaxes transfer constraint, does not lead to efficiency, Alternative 1: Fertility dependent PAYG,
Alternative 2: Fertility subsidy and Government debt.
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The Model Households: max
o ,s i ctm ,nt ,ct+1 t+1 ,{bt+1 }i
o Ut =u(ctm ) + βu(ct+1 )+V
s.t.
nt nt ,
0
i di Ut+1 nt
ctm + θt nt + st+1 ≤ wt (1 + bt ) nt o i bt+1 wt+1 di ≤ rt+1 st+1 ct+1 + 0 i bt+1 ≥ bt+1 o ctm , ct+1 , nt ≥
0
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The Model Households: max
o ,s ctm ,nt ,ct+1 t+1 ,bt+1
o Ut =u(ctm ) + βu(ct+1 ) + V (nt , Ut+1 )
s.t.
ctm + θt nt + st+1 ≤ wt (1 + bt ) o + nt bt+1 wt+1 ≤ rt+1 st+1 ct+1
bt+1 ≥ bt+1
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The Model Households: max
o ,s ctm ,nt ,ct+1 t+1 ,bt+1
o Ut =u(ctm ) + βu(ct+1 ) + V (nt , Ut+1 )
s.t.
ctm + θt nt + st+1 ≤ wt (1 + bt ) o + nt bt+1 wt+1 ≤ rt+1 st+1 ct+1
bt+1 ≥ bt+1 bt+1 can be interpreted as property rights:
bt+1 = −1
parents own children’s income
bt+1 = 0
children own their own income
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The Model Households: o Ut =u(ctm ) + βu(ct+1 ) + V (nt , Ut+1 )
max
o ,s ctm ,nt ,ct+1 t+1 ,bt+1
s.t.
ctm + θt nt + st+1 ≤ wt (1 + bt ) o + nt bt+1 wt+1 ≤ rt+1 st+1 ct+1
bt+1 ≥ bt+1 Production:
Mkts clear:
Yt
= F (Kt , Lt )
wt
= FL (kt , 1)
rt
= FK (kt , 1)
Lt
= nt−1
Kt
= st = kt nt−1
(Note: full depreciation) 10 / 45
Costs and Benefits of Child-rearing o Vn (nt , Ut+1 ) = βu (ct+1 ) rt+1 θt + bt+1 wt+1 The higher b t+1 , the more likely constraint is binding, → increases cost of children, → distorts incentive to have children.
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Costs and Benefits of Child-rearing o Vn (nt , Ut+1 ) = βu (ct+1 ) rt+1 θt + bt+1 wt+1 The higher b t+1 , the more likely constraint is binding, → increases cost of children, → distorts incentive to have children. Equalizing inter-temporal and -generational MU in cons.: o )rt+1 u (ctm ) = βu (ct+1 o βu (ct+1 )nt
m = VU (nt , Ut+1 )u (ct+1 )+
λb,t+1 wt+1
λb,t+1 : how far off most preferred consumption allocation? 11 / 45
Utility Specifications o Ut = u(ctm ) + βu(ct+1 ) + V (nt , Ut+1 )
Razin-Ben-Zion (RB) specification given by: V (nt , Ut+1 ) = γu(nt ) + ζUt+1 Barro-Becker type altruism (BB) given by: V (nt , Ut+1 ) = ζg(nt )Ut+1 For u(·) = log(·), RB and BB represent the same preferences. Generally, the two are not a special case of each other.
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Optimal Transfer, b∗ , if b = −1 Assume: u(·) = log(·), ζ < 1, γ > ζ (1 + γ + β) > 0. b∗ =
θr ∗ ζ(1 + β + γ) − w ∗ γ w ∗ (γ − ζ (1 + γ + β))
Note:
b ∗ may be negative – even with altruism.
Especially if ζ small, γ large, w high or r low.
Suggests that even altruistic parents want to “steal”/take from their children in many circumstances.
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What we do 1. From extreme example:
If property rights (PR) lie with children: fertility inefficiently low, i.e. fertility up, through PR shift → everyone better off.
2. Analyze general OLG model:
children are a consumption good, parents are altruistic, property rights: minimum transfer constraint, appropriate efficiency concept: A−efficiency
Basic result: Equilibrium allocation A−efficient ⇔ parents are not transfer constrained. 3. Revisit previous efficiency results in OLG. 4. Policy implications 14 / 45
A− and P−Efficiency Golosov, Jones and Tertilt (2007)
Definition A feasible allocation is A−efficient if there is no other feasible allocation such that all people alive under both allocations are no worse off and at least one is strictly better off.
Definition A feasible allocation is P−efficient if there is no other feasible allocation such that all potential people are no worse off and at least one is strictly better off. (*) [(*)Note: requires a utility function that is defined over states of the world where a person is not born.] 15 / 45
A− and P−Efficiency: Results Proposition Assume VU > 0. If parameters are such that λb,t = 0 for all t, then the equilibrium allocation, o∗ , n∗ , s ∗ , k ∗ , b ∗ }∞ , is A− (and P−) efficient. z ∗ ≡ {ctm∗ , ct+1 t t+1 t t+1 t=0
Proposition Assume VU > 0. If parameters are such that λb,s+1 > 0 for some generation s, then the equilibrium allocation, o ,n ˆt+1 }∞ , is A− (and P−) inefficient. ˆt , sˆt+1 , kˆt , b zˆ ≡ {cˆtm , cˆt+1 t=0
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A−superior allocation to zˆ Generation s receives: c˜sm = cˆsm − θs o o ˆ s+1 ) = cˆs+1 + (∆ − bs+1 w c˜s+1
˜s = n ˆs + n s˜s+1 = sˆs+1 .
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A−superior allocation to zˆ Generation s receives: c˜sm = cˆsm − θs o o ˆ s+1 ) = cˆs+1 + (∆ − bs+1 w c˜s+1
˜s = n ˆs + n s˜s+1 = sˆs+1 .
−mass of new people (not alive in zˆ ) receive: o,n o = cˆs+1 c˜s+1 m,n = c˜s+1
n ˆs+1 ˜s+1 =n n
n = sˆs+2 s˜s+2
˜s ) − F (sˆs+1 , n ˆs ) F (sˆs+1 , n ˆs+1 +bs+1 w ˆ s+1 −∆ −sˆs+2 −θs+1 n
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A−superior allocation to zˆ Generation s receives: c˜sm = cˆsm − θs o o ˆ s+1 ) = cˆs+1 + (∆ − bs+1 w c˜s+1
˜s = n ˆs + n s˜s+1 = sˆs+1 .
−mass of new people (not alive in zˆ ) receive: o,n o = cˆs+1 c˜s+1 m,n = c˜s+1
n ˆs+1 ˜s+1 =n n
n = sˆs+2 s˜s+2
˜s ) − F (sˆs+1 , n ˆs ) F (sˆs+1 , n ˆs+1 +bs+1 w ˆ s+1 −∆ −sˆs+2 −θs+1 n
Everyone else receives the same as in zˆ . Note: Feasible by construction.
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A−superior allocation to zˆ Allocation A− and P−superior:
Generation s: ˜ s (,∆) ∂U u (cˆm ) s+1 ∂ =0 ˆo ˆ ˆ = βu (cs+1 ) − VU ns , Us+1 ∆=0 ˆs ∂∆ n λb,s+1 = >0 ˆs n ˆ s. ˜s > U Hence, ∃, ∆ > 0 s.t. U
For people alive in zˆ and t < s:
t > U ˆ t since Vu > 0 U
For people alive in zˆ and t > s:
t = U ˆt U
n > u(unborn). −mass new people (+ descendants): U s+1 18 / 45
Efficiency Results and Coase’s Theorem Coase’s Theorem Property rights don’t matter for efficiency of allocation —if bargaining is possible.
Our results 1. When parents “own” children, costs and benefits of having children borne by same people: parents. → equilibrium fertility is efficient 2. When parents don’t “own” children, costs and benefits of having children borne by different people. Parents bear cost, children reap benefits. → equilibrium fertility not efficient 3. Unborn children cannot write contract with parents when property rights are assigned to them by law. 19 / 45
What we do 1. From extreme example:
If property rights (PR) lie with children: fertility inefficiently low, i.e. fertility up, through PR shift → everyone better off.
2. Analyze general OLG model:
children are a consumption good, parents are altruistic, property rights: minimum transfer constraint, appropriate efficiency concept: A−efficiency
Basic result: Equilibrium allocation A−efficient ⇔ parents are not transfer constrained. 3. Revisit previous efficiency results in OLG. 4. Policy implications 20 / 45
What we do 3. Revisit previous efficiency results in OLG. no altruism
with altruism
exogenous fertility
endogenous fertility
Samuelson (1958),
Michel, Wigniolle (2007),
Cass (1972),
Conde-Ruiz, Giménez and
Balasko and Shell (1980)
Pérez-Nievas (2004)
(r > n) nec. & suff. for PO
(r > n) not suff. for M−efficiency (r > w /θ) suff. for M−efficiency
Barro (1974),
Pazner and Razin (1979)
Burbidge (1983)
(r > n) always, “efficient”
“operative transfers” nec. & suff for PO
21 / 45
What we do 3. Revisit previous efficiency results in OLG. no altruism
with altruism
exogenous fertility
endogenous fertility
Samuelson (1958),
Michel, Wigniolle (2007),
Cass (1972),
Conde-Ruiz, Giménez and
Balasko and Shell (1980)
Pérez-Nievas (2004)
(r > n) nec. & suff. for PO
(r > n) not suff. for M−efficiency (r > w /θ) suff. for M−efficiency
Barro (1974),
Pazner and Razin (1979)
Burbidge (1983)
(r > n) always, “efficient”
“operative transfers” nec. & suff for PO
This Paper: (r > n) necessary but not sufficient for A−efficiency But property rights also matter for Pareto efficiency 21 / 45
A−efficiency and Pareto efficiency Proposition
A stationary equilibrium allocation is Pareto efficient if and only if r > n.
In a stationary equilibrium, r > n is a necessary but not sufficient condition for A−efficiency.
22 / 45
Steady State Efficiency Results
Efficiency
Population inefficiency
Pareto inefficiency
n r w/θ
b∗
Constraint, b
bP 23 / 45
What we do no altruism
with altruism
exogenous fertility
endogenous fertility
Samuelson (1958),
Michel, Wigniolle (2007),
Cass (1972),
Conde-Ruiz, Giménez and
Balasko and Shell (1980)
Pérez-Nievas (2004)
(r > n) nec. & suff. for PO
(r > n) not suff. for M−efficiency (r > w /θ) suff. for M−efficiency
Barro (1974),
Pazner and Razin (1979)
Burbidge (1983)
(r > n) always, “efficient”
“operative transfers” nec. & suff for PO
This Paper: (r > w/θ) necessary but not sufficient for A−efficiency But property rights also matter for M−efficiency
24 / 45
A− and P−Efficiency without Altruism Proposition Assume VU = 0. Then the transfer constraint is always binding. There are two cases: a) if b > −1, then the equilibrium is A− (and P−) inefficient; b) if b = −1, then the equilibrium is such that o = nt−1 = 0 for all t ≥ 1, ctm = ct+1
and the equilibrium is A− (and P−) efficient.
25 / 45
A− and P−Efficiency without Altruism Proposition Assume VU = 0. Then the transfer constraint is always binding. There are two cases: a) if b > −1, then the equilibrium is A− (and P−) inefficient; b) if b = −1, then the equilibrium is such that o = nt−1 = 0 for all t ≥ 1, ctm = ct+1
and the equilibrium is A− (and P−) efficient. ⇒ Using A− or P−efficiency not very interesting in models without altruism
25 / 45
Millian Efficiency Definition A symmetric feasible allocation is M− efficient if there is no other symmetric feasible allocation such that all generations are no worse off and at least one generation is strictly better off. Used by Michel, Wigniolle (2007), Conde-Ruiz, Giménez and Pérez-Nievas (2009) Under what conditions can zˆ be dominated by a symmetric allocation?
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A−efficiency and Millian efficiency Proposition
A stationary equilibrium allocation is M−efficient if r θ > w.
In a stationary equilibrium, r θ > w is a necessary but not sufficient condition for A−efficiency.
27 / 45
Steady State Efficiency Results A-efficient A-inefficient A-inefficient A-inefficient M-efficient M-efficient M-(in)efficient M-inefficient Pareto efficient Pareto efficient Pareto efficient Pareto inefficient
n r w/θ
b∗
bM
bP
Constraint, b 28 / 45
Property Rights versus Altruism b∗ bM bP
Constraint, b
A-inefficient M-inefficient Pareto inefficient A-inefficient M-(in)efficient Pareto efficient A-inefficient M-efficient Pareto efficient
A-efficient M-efficient Pareto efficient Altruism, ζ 29 / 45
Policy Implications 1. The introduction of standard PAYG pensions
alleviates downward pressure on fertility (at first); relaxes transfer constraint; equilibrium allocation NOT A−efficient.
2. Alternative I: Fertility dependent PAYG pensions (FDPAYG)
alleviates downward pressure on fertility; aligns costs and benefits of having children; equilibrium allocation A−efficient.
3. Alternative II: Fertility subsidy and Government debt
same as FDPAYG
30 / 45
PAYG Pension System Households: o ) + V (nt , Ut+1 ) max Ut =u(ctm ) + βu(ct+1
s.t.
ctm + θt nt + st+1 ≤ wt (1 + bt − τt ) o + bt+1 wt+1 nt ≤ rt+1 st+1 + Tt+1 ct+1
bt+1 ≥ bt+1 Gov.ment budget balance: T t = nt−1 τt wt Note: Since labor supply is inelastic, τt proportional but still lump-sum for period t.
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Efficiency of PAYG Pension System? Budget constraint: o m +[ct+1 +θt+1 nt+1 +st+2 −wt+1 +τt+1 wt+1 ]nt ≤ rt+1 st+1 +Tt+1 ct+1
Lump-sum taxes (per person) are not really lump-sum!
They distort fertility decision (more children = more taxes).
Parent does not realize that more children also increase Tt+1 .
Even if constraint not binding: Fertility inefficiently low.
⇒ “Operative transfers” not sufficient with fertility choice
32 / 45
Exogenous vs. endogenous fertility no altruism
with altruism
exogenous fertility
endogenous fertility
Samuelson (1958),
Michel, Wigniolle (2007),
Cass (1972),
Conde-Ruiz, Giménez and
Balasko and Shell (1980)
Pérez-Nievas (2004)
(r > n) nec. & suff. for PO
(r > n) not suff. for M−efficiency (r > w /θ) suff. for M−efficiency
Barro (1974),
Pazner and Razin (1979)
Burbidge (1983)
(r > n) always, “efficient”
“operative transfers” nec. & suff for PO
This Paper: Operative transfers necessary but not sufficient for A−efficiency.
33 / 45
Alternative I: Pay-out depends on n T (nt ) = nt τt+1 wt+1 Households: o ) + V (nt , Ut+1 ) max Ut =u(ctm ) + βu(ct+1
s.t.
ctm + θt nt + st+1 ≤ wt (1 + bt − τt ) o + bt+1 wt+1 nt ≤ rt+1 st+1 + τt+1 wt+1 nt ct+1
bt+1 ≥ bt+1
Note that b and τ enter symmetrically. → increase τ increases b ∗ one for one
Choose τ s.t. b ∗ ≥ b not binding.
Allocation is A−efficient.
Aligns costs and benefits of child-rearing.
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Alternative II: Fertility subsidy and Government debt Households: o ) + V (nt , Ut+1 ) max Ut =u(ctm ) + βu(ct+1
s.t.
ctm + θt nt + (st+1 + dt+1 ) ≤ wt (1 + bt − τtd ) + τts nt o ct+1 + bt+1 wt+1 nt ≤ rt+1 (st+1 + dt+1 )
bt+1 ≥ bt+1 Gov.ment budget: n t−1 (dt+1 + τtd wt ) = rt dt + τts nt nt−1 Set τtd = τt . w
t+1 . Set τts = τt+1 rt+1
→ same solution as FDPAYG, with d t+1 = τts nt . “Ricardian Equivalence” 35 / 45
Summary
Many countries are worried about ‘too low fertility’.
We provide a rationale for pronatalist policies.
Misaligned property rights lead to inefficiently low fertility. → Coase’s Theorem. → Property rights and Efficiency in OLG.
PAYG pensions: 1. Relaxes property rights constraint. 2. But distorts fertility decision. 3. Alternatives: Fertility dependent PAYG or Fertility subsidy and Gov debt
What’s next? 36 / 45
What’s next?
Analogy investment in children’s human capital
Why did property rights shift from parents to children?
Political economy of shift in property rights?
Who wanted to pass laws and why?
Who was constrained?
Technological reasons?
rural vs urban, extended vs nuclear families?
Quantitative importance?
How much of a contribution to fertility history in the US?
Average decrease, boom and bust? Differential fertility?
Which countries experience(ed) inefficiently low fertility?
Welfare gains from policy reform?
37 / 45
Adding Human Capital
Parents cannot borrow against children’s income and resulting inefficiencies in human capital investment → pointed out before in the literature.
Fernandez and Rogerson (2001), Aiyagari, Greenwood, Seshadri (2002), Boldrin and Montes (2005), . . .
Focus in literature: borrowing constraints in exogenous fertility context.
38 / 45
Analogy: Fertility and Human Capital decisions
Both e and n are inefficiently low when constraint binding.
One critical difference: costs and benefits of HK investments aligned if child makes decisions and credit markets function.
Not possible for fertility decisions – a child can never decide to be born!
39 / 45
What’s next?
Analogy investment in children’s human capital
Why did property rights shift from parents to children?
Political economy of shift in property rights?
Who wanted to pass laws and why?
Who was constrained?
Technological reasons?
rural vs urban, extended vs nuclear families?
Quantitative importance?
How much of a contribution to fertility history in the US?
Average decrease, boom and bust? Differential fertility?
Which countries experience(ed) inefficiently low fertility?
Welfare gains from policy reform?
40 / 45
Stubborn Son Law Act of the General Court of Massachusetts in 1646: If a man have a stubborn or rebellious son, of sufficient years and understanding, viz. sixteen years of age, which will not obey the voice of his Father or the voice of his Mother, and that when they have chastened him will not harken unto them: then shall his Father and Mother being his natural parents, lay hold on him, and bring him to the Magistrates assembled in Court and testify unto them, that their son is stubborn and rebellious and will not obey their voice and chastisement . . . such a son shall be put to death. States that followed were Connecticut 1650, Rhode Island 1668, New Hampshire 1679.
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Old Age Support for Parents English Poor Laws of 1601: “The family, as a unit, was to be responsible for poverty-stricken kinfolk[...] The Poor Law did not concentrate on the children of elderly, but extended the network of potential support to include the fathers and mothers, and the grandfathers and grandmothers, of the poor[...] When these laws passed over into the American scene, during the seventeenth and eighteenth centuries, the focus was on the responsibilities of children towards their elderly parents[...]” (Callahan 1985, pg 33)
Code Napoléon (1804), Art. 205: “Children are liable for the maintenance of their parents and other ascendants in need.”
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Other Legal Ways of Controlling Children Patria Potestad (Spain and France) – “The control which a father exercised over his children, a control similar to that over material things and one which permitted a father to sell or pawn a child if necessary and even to eat it in an extreme case” Lettres de Cachet – “Letters signed by the king often used to enforce authority and sentence someone without trial. They could be used by parents when their child refused to follow parental direction with respect to a marriage partner or career.” Parental consent in marriage decisions (Code Napoléon 1804) – “[...]children, regardless of age, were bound to seek the consent of their parents (or grandparents if both parents were deceased) (Article 151).”
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Living Arrangements “Considerable evidence suggests that parents in the now-developed countries once enjoyed important economic benefits from child-rearing, not only because children began to work at an early age, but also because parental control over assets such as family farms gave them leverage over adult children.” (Folbre, 1994) “[...] the decline of intergenerational coresidence resulted mainly from increasing opportunities for the young and declining parental control over their children.” (Ruggles, 2007)
44 / 45
Shift in Rights over Children (Children’s Income) Pre-1900:
Mandatory parental support: Poor Law Act 1601 Code Napoléon, Art. 205.
Laws revoked/weaker.
Indirect control:
20th Century:
Corporal punishment/ physical cruelty legal. Patria potestad and lettres de cachet. Indenture of children legal. Parental consent required for marriage, medical,...
Abused children removed from parents. Age of majority decreased. Banned child labor. Parental consent not required.
Living arrangements
Extended family
Parents own children’s income
Nuclear family
Children own their income 45 / 45
