Signaling of earlier-born Children's endowments, intra-household allocation, and birth-order effects

Xu Wei, Yi Zhou and Yimin Zhou

Economic Modelling, 2022, vol. 108, issue C

Abstract: This paper provides a new explanation for birth-order effects by considering the genetic similarity between siblings. We develop a quantity–quality trade-off model in which parents form their expectations of possible future children's endowments by observing the performance of their existing children. Our model shows that having a talented first child may weaken parents' incentive to have additional children due to the substitution effect. However, it also may encourage a second birth due to the signaling effect. Without assuming that children of a specific birth order have a biological advantage or more parental attention, this model predicts a birth-order gap in parents' human capital investment, the magnitude of which depends on the endowments of the first child and its predictive power as a signal of the potential endowment of a possible second child.

Keywords: Child endowments; Intra-household allocation; Birth-order effects; Fertility decisions (search for similar items in EconPapers)
JEL-codes: D13 I26 J13 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:108:y:2022:i:c:s0264999321003436

DOI: 10.1016/j.econmod.2021.105754

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