In recent years economists have begun to look more closely at the microeconomic determinants of family fertility in an attempt to provide a better theoretical and empirical explanation for the observed falling birth rates associated with Stage III of the demographic transition. In doing this, they have drawn on the traditional neoclassical theory of household and consumer behaviour for their basic analytical model, and have utilised the principles of economy and optimisation to explain family-size decisions.
The conventional theory of consumer behaviour assumes that an individual with a given set of tastes or preferences for a range of goods (i.e., a "utility function") tries to maximise the satisfaction derived from consuming these goods subject to his own income constraint and the relative prices of all goods. In the application of this theory to fertility analysis, children are considered as a special kind of consumption good so that fertility becomes a rational economic response to the consumer's demand for children relative to other goods. The usual income and substitution effects are assumed to apply.
Thus the economic theory of fertility assumes that the household demand for children is determined by consumers' preferences for a certain number of surviving children, by the price or "opportunity cost" of rearing these children, and by levels of consumers' income.
This paper tests the relevance of the traditional theory of consumer behaviour as applied to the demand for children in Botswana. The results seem to confirm this theory in part. The demand for children decreases as their "price" increases or as children become more expensive relative to other goods (this is the substitution effect of the rise in the price of children). The price of children was considered to be the "opportunity cost" of having children, measured in terms of income that could be earned if the parent is not at home caring for children. Using educational status as a proxy for this foregone income, the educational levels of the parents was taken as a proxy for the price of children.
Contrary to the theory's hypothesis of a positive relationship between income and the demand for children, the paper revealed that income impacts on fertility significantly but negatively (negative income effect), indicating a substitution effect that overpowers the income effect. The negative trend between income and the number of children ever born prevailed in all age groups for both males and females. Monthly income, measured in terms of monthly salaries, was used.
In addition to income and price, it was found out that the use of contraception plays a significant role in reducing the number of children.