Essay on the Theory of Intergenerational Wealth Flow

According to J.C. Caldwell, who developed the theory which has come to be known as the “theory of intergenerational wealth flow,” fertility behaviour in any type of society at any level of development is rational.

In a society, the fertility is high if children are economically useful to parents and low if children are economically not beneficial to the parents.

Whether the children are economically beneficial to parents is determined by social conditions: mainly the direction of the intergenerational flow of wealth (in terms of goods and services).

This flow of wealth in all primitive and traditional societies has been from younger persons to the older persons, i.e, from the younger generation to the older generation.

In other words, children in such societies are economic assets to their parents and naturally more children mean more wealth, leading to high fertility.

Fertility will remain high as long as this intergenerational wealth flow is from children to parents. At this juncture, it is necessary to identify the nature and magnitude of intergenerational wealth flows in different societies.

Children are useful to parents in several ways in primitive and traditional societies. Six different economic advantages to the parents can be identified:

1. There is a situation gain to the head of household when the number of children is large. In the extended family type of household, the head of the household can control more resources and also can have access to more services if the number of his children, daughters-in-law and grandchildren is large. The larger the household size the greater the power of the head.

2. Children work in the household and on the farm and produce goods. They also do small jobs, such as bringing fuel and water, carrying goods and messages, sweeping, looking after younger siblings, caring for the animals, etc.

3. Adult children assist their parents by working in the farms as labourers.

4. Adult children are of great help in family ceremonies, such as marriages, funerals and ceremonies connected with births in the household. They also contribute to community festivals.

5. The grown-up children take care of the aged parents.

6. Parents can invest in the training and education of children so as to increase the ability of children to make returns.

Thus, it is clear that in primitive and traditional societies, children are assets to parents and having a larger number of them is economically advantageous. In such societies, the net flow of wealth is from children to parents and hence high fertility is economically rational.

When the direction of this net flow of wealth changes, i.e., when the flow of wealth is from parents to children, low fertility becomes economically rational.

The question is: How to bring about this reversal of flow of wealth? The direction of this flow will not change unless the family is largely nucleated both emotionally and economically.

A good deal of emotional nucleation is required for economic nucleation and a larger amount of both are necessary for parents to incur a large expenditure for their children.

What is emotional and economic nucleation? Emotional nucleation can be said to have taken place in the family when parents are more concerned with their own children, their future, and even the future of their children’s children and are less concerned with the ancestors or extended family relatives.

Thus in a situation of emotional nucleation, the emotional tie between the parents and children is stronger. While they spend on their children, they demand and expect very little in return from them.

According to Caldwell, this emotional and economic nucleation can be brought about by importing a different type of culture Westernization, implying the European concept of family relationships and obligations with strong ties between husband and wife and concentration of concern and expenditure on one’s own children.

In many developing countries, this import has already started and the two aspects of modernization, namely, mass education and mass communication, can give impetus to this on­going process.

Caldwell points out that family nucleation and reversal of intergenerational wealth flow are likely to occur in the developing world in a big way during the next half century and these processes will bring down the birth rates and also slow down population growth.

It is important to note that it is not expected that even when the intergenerational flow of wealth is from the younger to the older generation, the maximum level of fertility will ever be achieved.

This is because of psychological, physiological and social factors. Similarly, it is not expected that zero fertility will be desired if the intergenerational flow of wealth is reversed, because factors other than economic motives come into play.