The objectives of this chapter are to introduce oligopoly. The following will be discussed in this chapter: Concentration Ratios, the Herfindahl-Hirschman index, the competitive spectrum, the kinked demand curve, administered prices. | Chapter 31 The Economics of Children Chapter Outline TAXPAYER SPENDING ON CHILDREN PARENTAL SPENDING ON CHILDREN WHO’S HAVING CHILDREN OTHER SOCIAL CHARACTERISTICS OF CHILDREN Taxpayer Spending on Children $389 Billion on K-12 education $146 to $197 Billion on Welfare (for many programs you do not qualify unless you have children) TANF SSI/EITC* Food Stamps Housing Subsidies Medicaid* *These are the exceptions. It is somewhat difficult separate adult from child eligibility for SSI and EITC. Many elderly qualify for Medicaid on their own. Parental Spending on Children Between $6,080 and $13,800 is spent by parents per child depending on family living standards. Using the concept of present value, the total cost of raising a child to age 18, (excluding birth, daycare, and college) is between $88,000 and $175,000. Other costs Birth Costs Opportunity Costs Daycare College Opportunity Costs When families have children they lose earning potential. This happens more often and to a greater degree with women. Economists count as a cost of having children the income that would have been earned by parents that stay-at-home. Taking opportunity costs into account can double the cost per child. Saving for College Present Value: the amount you would have to set aside today to pay for college for a child 18 years from their birth. Savings: How much do you have to save per year to have enough to put a child through college 18 years from now? Hypothetical Example Suppose there are two alternatives State U currently costs $10,000 per year Private U currently costs $25,000 per year Assume tuition is rising at 4% annually. Assume you have a mutual fund that nets 8% annually. In 19 years State U will cost $20,000 and Private U will cost $50,000. If you start at the child’s birth you will need to save $1,850 per year to pay for State U and $4,625 to pay for Private U. Who Has Children Birth rates among the poor and among minorities is substantially higher than it is for the middle class or wealthy or for whites. 70% of all children live with both parents while for African-Americans the figure is 33%. Poverty Among Families With Children The Poverty Rate for children (around 20% depending on year) is nearly twice the national average (around 11% depending on year). The Poverty Gap for female-headed households with children is $2,151 vs $1,615 for married households with children. Other Social Statistics for Children Children 12 to 19 are 15% of the population and nearly 30% of crime victims. 15% of children have no health insurance 25% are improperly immunized Divorce and Child Support There are 8 million non-custodial fathers (NCFs) that have 15 million children. NCFs are ordered to pay on average $3,400 per child, and less than half of that is paid. Married fathers typically contribute 19% to 39% of their income to the support of their children while NCFs that pay support typically pay less than 15%.
