(UM07-12) - Children and Household Wealth
John Karl Scholz and Ananth Seshadri
Our project examines the effects of children on household wealth accumulation. Children affect wealth for several reasons. Family size is correlated with lifetime earnings, so optimal asset accumulation varies depending on the household’s place in the income distribution. The number and timing of children also affects optimal consumption decisions. Our study highlights the role that children play in accounting for the well-know fact that wealth is more dispersed than earnings and enhances understanding of the utility-maximizing asset goals for workers. Our work also has implications for designing government programs targeting retirement wealth.