By Nigar Hashimzade
This paper investigates the effects of parenting time on macroeconomic outcomes and welfare when parenting choices are determined by own childhood experience and social norms in an overlapping generations framework. Parenting time and material expenditures on children generate children’s human capital. When the share of parenting time is relatively low and parenting and leisure are complements or weak substitutes the model has two steady-state equilibria with different welfare levels. In the high-welfare equilibrium parents have stronger endogenous taste for parenting and spend more time with children and less in paid work. Higher productivity due to the higher human capital more than compensates for the reduction in working hours, leading to a higher output level, in comparison to the low-welfare equilibrium.
I find the concept of endogenous preferences a bit unsettling, as I was taught that tastes are exogenously given. The idea here, though, is that preferences regarding parenting choices are driven by parents, peers, and own experiences. This can lead to interesting dynamics. But fundamentally, preferences are still exogenous, they simply follow a more complex “algorithm.” Little by little, we are getting closer to the chemical processes that drive our decisions.