Fertility Theory: Theory of Intergenerational Wealth Flows

Caldwell's theory of wealth flows explains fertility decline as a rational decision by parents based on the direction of intergenerational transfers. In high-fertility contexts, this theory proposes that children produce more than they consume and therefore provide net wealth to parents. In contrast, in low-fertility contexts, parents invest more in children, resulting in children being a net economic cost. Empirical tests of this hypothesis have not found evidence to show that children are net providers to parents in high-fertility contexts. A weaker prediction of the model, that when children are more expensive, parents desire fewer of them, has been supported.