Using Time-Use Data to Estimate the Full Costs of Children

This paper uses the 'adult goods' method to estimate the full costs of children. Full costs include both expenditure and time costs. Adult personal time (comprising pure leisure, sleep and other personal care) is used as the adult good. Previous research has shown that the presence of children in the household leads to a reduction in adult personal time. This paper develops a simple household economic model to show how this information can be used to develop an equivalence scale for adult consumption which takes account of both the expenditure and time costs of children. Preliminary estimates using Australian data suggest a very large cost. A couple with two children (one of which is in pre-school) require an income around 2.7 times as large as a couple with no children in order for the adults to have the same consumption level. The full cost of children appears to decline with age (despite the expenditure cost rising). The paper discusses the limitations of the adult good method and considers the broader welfare implications of these costs while taking into account the benefits that parents obtain from parenthood.