The substitution and complementarity relationships among child health, child schooling and number of children in a developing country are explored, in order to test the thesis that governmental initiatives in health care, education and family planning could be orchestrated in a manner that would permit a cost-effective implementation of the national goals of reduced population growth and increased human capital build-up. The study investigates whether households respond to relative changes in costs and prices, induced by subsidization of government services, which in turn should induce a substitution in the family context between child quality and quantity. Government policy initiatives and an economic framework of household decision making are linked together, using a reduced-form demand model which incorporates unobservable individual and community effects. The central coefficients are the price effects of publicly-subsidized health services, schools and family planning programs. The provision of governmental programs is assumed to be non-random, due to location-specific endowments that influence the distribution of the programs. An instrumental variables estimation technique is used to resolve the combined problem of unobserved effects and the endogeneity of policy variables. The model merges household-level and community-level panel data from the Philippines. The estimation results suggest that households respond optimally to variations in the price of governmental programs by shifting the allocation of family resources from an assured number of children to less but healthier and better educated children. The regression analyses show that child quality and child quantity are partial substitutes and the quality components in the study--health and education--are complements. A carefully-designed policy that combines government programs in a mutually-reinforcing way would be much more effective than a one-program instrument in improving household welfare in the context of decreasing population growth and enhancing human capital.
Supervisor: Jere Behrman. Thesis (Ph.D. in Public Policy Analysis and Management) -- Graduate School of Arts and Sciences, University of Pennsylvania, 1990. Includes bibliography and index.