Title: Child Endowment and the Demand for Children@ Revisiting the Quantity-Quality Model of Fertility (joint with Yeshaya Nussbaum – Hebrew University)

Abstract: China’s one-child policy or Past research has tested the quantity-quality model of fertility by studying a shock to quantity, typically by exploiting the birth of twins or China’s one-child policy. We take an alternative approach and study the effect of a quality shock on the QQ trade-off, which we conceptualize as the birth of a child with an extreme level of intellectual endowment. Theory predicts that a rise in child endowment increases parental demand for children through an increase in family income and a decline in the shadow price of children. The opposite is true for a fall in child endowment. Using two quasi-experiments, we test these predictions and estimate the reduced-form effect of a positive or negative change in endowment on family size. The first experiment estimates the effect of a first-born high-endowment child on further fertility in a sample including families with either a first- or second-born high-endowment child and at least two children. Similarly, we estimate the effect of a second-born high-endowment child on further fertility in a sample including families with either a second or third-born high-endowment child and at least three children. We use Israeli data on families and their children and measure high endowment by giftedness or exceptional scores on early cognitive tests. We find that the birth of a high-endowment child increases the probability of an additional child in both quasi-experiments. In addition, as the information on child endowment becomes noisier, parents' ability to recognize the endowment is a condition for its effect. On the other hand, the birth of a low-endowment child, measured as enrolment in a special-education class, negatively affects family size in both quasi-experiments. However, this effect is smaller and less significant in the first experiment, estimating the effect of a first-born low-endowment child. This last result is consistent with families' preference for a child with a regular endowment, which offsets the negative income and price effects activated by a low-endowment child. Overall, our results point to child endowment as an important factor affecting fertility choice.

This workshop is hybrid, here is a Teams link . https://teams.microsoft.com/l/meetup-join/19%3ameeting_OWE3ZDAyNWYtYTgzMS00NTUxLWI2ZDktMWYxZjFkYjQyZTUy%40thread.v2/0?context=%7b%22Tid%22%3a%2209bacfbd-47ef-4465-9265-3546f2eaf6bc%22%2c%22Oid%22%3a%22d235acba-bb89-4eff-a07c-515e0b711c79%22%7d

Title: Firm Adaptation in Production Networks: Evidence from Extreme Weather Events in Pakistan (Joint with Johannes Boehm and Mazhar Waseem)

 Abstract - This paper considers how far private adaptation may reduce future vulnerability to climate

change. Firms’ climate risk exposure depends not only on the location of production, but also

on network effects via the flood risk profile of suppliers and transportation links connecting

trading partners. We use data on monthly firm-to-firm transactions for the near-universe of

formal sector manufacturing firms in Pakistan and more than six billion observations from

commercial trucks traveling on the road network from 2011 to 2018 to study adaptation of

firms in production networks. We find that firms affected by major floods relocate to less flood-prone

areas, diversify their supplier base, and shift the composition of their suppliers towards

those located in less flood-prone regions and reached via less flood-prone roads. Identification

strategies that exploit both firm- and route-level flooding suggest that these responses reflect

forward-looking actions to reduce future vulnerability to flood risk rather than direct effects of

flooding, and are consistent with experience-based Bayesian updating. The results suggest that

the impacts of climate change will be mediated as firms learn from the experience of increasingly

frequent climate disasters.