The Selectivity of Fertility and the Determinants of Human Capital Investments: Parametric and Semi-Parametric Estimates

In this paper we assess the importance of heterogeneity and selectivefertility in altering estimates and interpretations of the determinants ofthe human capital of children. We set out a sequential model of humancapital investments in children incorporating endogenous fertility andheterogeneity in human capital endowments toillustrate the fertility selection problem and issues of identification.Empirical results based on parametric and semi-parametric estimates ofselectivity models applied to data on birthweight and schooling in Malaysiaindicate that the hypothesis of no fertility selection is strongly rejected,with mothers having higher birthweight children tending to havesubstantially lower birth probabilities (negative birth selectivity). As aconsequence, the positive association between mother's schooling andbirthweight is substantially underestimated and the positive effects ofdelaying childbearing overestimated when birth selectivity is not taken intoaccount. The schooling results indicate strong rejection of the "efficientschooling" model, in which schooling is allocated efficiently acrosschildren, but only when the selectivity of fertility is taken into account.