Does Policy Affect Outcomes for Young Children? An Analysis with International Microdata - August 1999

2. Conceptual Framework

Previous

Contents

Next

Economics as a discipline is dominated by models in which individual agents make utility-maximizing choices. Hence, it is not surprising that the most influential economic model⁴ of the determinants of children's well-being is one which focuses on how parental choices affect outcomes for children (see Becker and Tomes, 1986).⁵ In this framework the family is viewed as a small factory, in which the parents are the 'bosses' who make decisions about how and what to produce. For example, they make decisions which will determine how much the family has in the way of economic resources by deciding how much time to spend working for pay (and they have previously decided upon how much education to pursue which will determine their rate of pay). Parents then decide about how economic resources will be used — for adult consumption, for asset accumulation or for investments in children, where investments in children are "expenditures on their skills, health, learning, motivation, 'credentials,' and many other characteristics" (Becker and Tomes, 1986, p. S5). Parents are also assumed to decide about the sort of neighbourhood in which the family will live, about how many siblings each child will have and about the family structure in which the child will grow up.⁶ All of these choices are assumed to influence children's attainments.⁷

In the excellent survey by Haveman and Wolfe (1995), the basic economic framework is expanded to indicate that children's well-being will depend upon 3 primary factors: 1) the choices made by society which will determine the options available to either children or their parents — what Haveman and Wolfe call "the social investment"; 2) the choices made by the parents about both the quality and quantity of resources devoted to children — "the parental investment;" 3) the choices made by the children themselves, where this third component is argued to be most important for older children (e.g., those 13 to 15 who understand the relationship between behaviour and outcomes).

Yet, despite this expanded conceptual framework proposed by Haveman and Wolfe, most of the empirical research by economists directed toward understanding children's attainments has focussed upon family-level variables rather than upon broader societal factors. In part, this may be the result of the individual, choice-based framework which characterizes most economic research. In part, in may be the result of data availability — economists most often work with large micro-data surveys with excellent information about family-level characteristics, so this is a logical starting point for research. Moreover, within a single cross-section of data for a single country, there is unlikely to be much variation in broader social context (e.g., macroeconomic conditions, social policies or social cohesion). Yet, this does not mean that such variables are unimportant and it would be unfortunate if policy debates, informed by micro-oriented economics research, were to ignore the important role of general macroeconomic and social policy in influencing outcomes for children.

Figure 1 illustrates how macroeconomic conditions, social policy and social context might influence children's well-being.⁸ First, of course, these factors will influence the family-level variables most-typically studied. For example, macroeconomic conditions will affect the labour incomes available to families. Social transfers and taxes will affect the disposable incomes available for 'parental investments' in children. Societal attitudes might influence the choices made by parents about their children. To the extent that these channels of influence are significant (and surely unemployment, taxes and transfers will be vitally important for the availability of family financial resources), then these factors are implicitly already included in the standard work. However, their influence is not typically highlighted.

But, social policy can also have important direct influences on children's well-being other than through family income. For example, health and education systems are directly experienced by children who go to school, visit the doctor/clinic or stay in a hospital. Social context might influence child well-being directly, if we think of environmental quality, or levels of crime, for example.

Social context is also likely to affect the social policies which are in place. For example, a more cohesive society might be more supportive of an excellent educational system or a stronger social safety net.

Finally, and very importantly, macroeconomic conditions in combination with the availability or lack of availability of a social safety net will influence the level of economic security perceived by parents and children. In an environment where parents are very worried about the risk of losing their jobs, perhaps both because rates of unemployment are high and because there would be few benefits available to them in this event, stress levels will be high. This may affect their parenting and thus children's well-being. Children may also be aware of parental stress and so feel anxious themselves. Notice that the effects noted here are possible for families with no actual experience of unemployment.

• ⁴In fact, I am not aware of a serious theoretical contender in the economics literature. It is worth noting, however, that the empirical economics literature is more developed in this area than the theoretical literature, and it is not necessarily true that all economists working on child well-being subscribe to the theoretical approach described below.
• ⁵As argued in Phipps 1998b, most of the focus of the economics literature is on the eventual attainments of children, once the children become adults. That is, an investment perspective is assumed. However, in this paper, we are considering the determinants of children's well-being while they are still young children (primarily aged 4 to 11 years).
• ⁶A great deal of choice is assumed here. Babies are not born by accident, and divorce is a optimizing choice.
• ⁷Non-economists have worked more extensively than economists on the subject of child development and offer several alternative theoretical perspectives, also surveyed by Haveman and Wolfe (1995). These include: a) the 'socialization/role model perspective' which focusses upon the important influences of parents, siblings and peers on the development of children's aspirations, values and behaviour (e.g., Seltzer, 1994; Jencks and Mayer, 1990); b) the 'ecological systems' approach favoured by many developmental psychologists which argues that development occurs throughout life, and that the timing and context of any significant life event (e.g., parental divorce) will modify its impact on that particular individual (e.g., Bronfenbrenner, 1989); c) stress theory and coping strategy perspectives argue that a particular stressful event (again, for example, parental divorce) may change a child's equilibrium path of development though the impact of such a stressful event can be mitigated, or not, depending upon parental coping capacities (e.g., Hamilton and McCubbin, 1980). As Haveman and Wolfe argue, these psychological and sociological perspectives emphasize environmental/cultural factors rather than the individual choices/characteristics upon which economists focus. Empirically, however, it may not always be easy to distinguish the various perspectives. For example, is it higher parental income as an input as economists might argue or better role models in the neighbourhood as sociologists might argue which is the key factor associated with better outcomes for children? Empirically, these two hypotheses would be very difficult to disentangle.
• ⁸Haveman and Wolfe (1995) provide only a brief sketch of their proposed expansion of the economic perspective on child development. What follows is thus my own interpretation/elaboration of their ideas, but I would not argue that anything substantive is added.