Intergenerational externalities in childcare time and macroeconomic performance

Economics

Further details

We study the effect of time allocation in a family on the macro behaviour of an economy. We use an overlapping generations model to describe an economy where children's human capital is affected by parental childcare time and where parents' preference for spending time with children are determined endogenously, via transmission of preferences between generations, within and across the families. The model exhibits multiple steady-state equilibria. A positive externality in childcare time results in an inefficiency of all competitive equilibria: too little time is spent with children, and, as a result, a competitive economy underperforms, compared to the first best outcome, where the parents' preference for childcare time is stronger, and the levels of output and human capital are higher, than in the private equilibria.