This paper presents development of a household Nash-bargaining
model in an overlapping generation setting to analyze the intergenerational
dynamics of education decisions and to analyze cooperatively bargained fertility
within a family. A stronger preference by women for the welfare of children
induces redistribution from women to men in exchange for higher educational
investment in children, although the cost to women of child rearing is compensated
by men when women care for their children. Subsequently, this paper
presents description of the policy effects on the dynamics that arise from
expansion of formal child-care coverage. The policy substitutes time costs that
were previously borne by mothers, i.e., a policy targeted at mothers. If the
education level of mothers is sufficiently high (low), then the policy lowers
(raises) fertility and increases (decreases) investment in education for children
in the long term. Most notable is the intermediate case: When a mother’s
education level is not too high and not too low, the policy raises both the
fertility rate and educational investment in daughters, while probably decreasing
investment in sons. The quantity–quality tradeoff for children might not hold.
The policy also raises the probability of marriage and the probability of having
children.

• Fertility and education decisions and child-care policy effects in a Nash-bargaining family model