Abortions and Inequality

In the last three decades over a million abortions were performed annually in the United States. Recent empirical studies assess the impact of legalization of abortions on living conditions of children and argue that legalization of abortions provides better living conditions and human capital endowments to surviving children. This paper takes seriously the hypothesis that legalized abortion can improve the living conditions of children and hence alter their future labor market outcomes. The main question of the paper is what are the implications of abortions for long-term income inequality. A model of marriage, fertility, human capital transmission, contraception and abortion decisions is built to answer this question quantitatively. Inequality will be higher in a world without abortions. The main reason for this is the higher and more unequally distributed number of children across households. Children also receive less human capital.