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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 McGrawHill/Irwin © 2002 The McGrawHill Companies, Inc., All Rights Reserved Chapter Outline • TAXPAYER SPENDING ON CHILDREN • PARENTAL SPENDING ON CHILDREN • WHO’S HAVING CHILDREN • OTHER SOCIAL CHARACTERISTICS OF CHILDREN McGrawưHill/Irwin â2002TheMcGrawưHillCompanies,Inc.,AllRightsReserved Taxpayer Spending on Children $389 Billion on K-12 education • $146 to $197 Billion on Welfare (for many programs you 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 McGrawHill/Irwin © 2002 The McGrawHill Companies, Inc., All Rights Reserved 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 – – – – McGrawHill/Irwin Birth Costs Opportunity Costs Daycare College © 2002 The McGrawHill Companies, Inc., All Rights Reserved 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 McGrawHill/Irwin © 2002 The McGrawHill Companies, Inc., All Rights Reserved 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 you have to save per year to have enough to put a child through college 18 years from now? McGrawHill/Irwin © 2002 The McGrawHill Companies, Inc., All Rights Reserved 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 McGrawHill/Irwin © 2002 The McGrawHill Companies, Inc., All Rights Reserved 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% McGrawưHill/Irwin â2002TheMcGrawưHillCompanies,Inc.,AllRightsReserved 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 McGrawHill/Irwin © 2002 The McGrawHill Companies, Inc., All Rights Reserved 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 McGrawHill/Irwin © 2002 The McGrawHill Companies, Inc., All Rights Reserved Divorce and Child Support • There are 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% McGrawHill/Irwin © 2002 The McGrawHill Companies, Inc., All Rights Reserved ... 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 McGrawHill/Irwin © 2002 The McGrawHill Companies, Inc., All Rights Reserved.. .Chapter Outline • TAXPAYER SPENDING ON CHILDREN • PARENTAL SPENDING ON CHILDREN • WHO’S HAVING CHILDREN • OTHER SOCIAL CHARACTERISTICS OF CHILDREN McGrawưHill/Irwin â2002TheMcGrawưHillCompanies,Inc.,AllRightsReserved... McGrawHill/Irwin © 2002 The McGrawHill Companies, Inc., All Rights Reserved Parental Spending on Children • Between $6,080 and $13,800 is spent by parents per child depending on family living standards