We consider the optimal determination of family allowances in a model where some of the parents have higher ability to raise children than others. First-best policy gives both types of parents the same level of utility. If neither parental ability nor parental actions are fully observable,...

There is evidence that fertility is positively correlated with infant mortality, and that a child`s chance of surviving to maturity increases with the level of nutrition, medical care, etc. received in the early stages of life. By modelling parental decisions as a problem of choice under...