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Measuring Cost of Children Using Equivalence Scale on Japanese Panel Data



In this paper, the cost of child rearing is estimated in order to examine the hypothesis that the recent fertility decline in Japan has been caused by increases in the cost of child rearing. Although there are various ways to estimate the cost of children, the research uses an equivalence scale. The results of the traditional Rothbarth estimation showed that the cost of child raising in Japan is not very high. However, the results of the equivalence scale estimation using "satisfaction for the income" as the utility measure showed that the cost of child raising is much higher than calculated in the Rothbarth model. The latter subjective scale approach is now said to have more advantages. Thus, the cost of child raising in Japan is much higher than was believed to be the case, and this could be one of the reasons for the decline in the fertility rate in Japan.

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