THE ECONOMICS OF CHILD ADOPTION: THEORY AND EVIDENCE

Author

Channary Khun, Southern Illinois University CarbondaleFollow

Date of Award

8-1-2013

Degree Name

Doctor of Philosophy

Department

Economics

First Advisor

Lahiri, Sajal

Abstract

The dissertation theoretically and empirically investigates the phenomenon of child adoption. Chapter 1 models the supply side of international adoption as a situation where families in a low-income country assume the role as suppliers of adoptable children. Under certain condition, the supply function can be downward-sloping. When that is so, we examine the role of household income and size in determining the equilibrium. The negatively sloped supply function can lead to potential multiplicity of equilibria in the adoption market, with one equilibrium where the price is low but a huge supply of adoptable children and another where price is high, yet few children are placed for adoption. We show that poor families are necessarily better-off at the latter and argue that government intervention can potentially move the economy to the good equilibrium where greater well-being of the poor can be achieved. Chapter 2, on the other hand, examines the incidence of child adoption from a demand perspective based on the framework of vertical product differentiation. With the assumption that adoptive parents have identical preference but different income levels, we derive the demand for private and public adoptions and examine an adoption policy. We show that adoption subsidies raise foster care adoptions at the expense of international and domestic private adoptions. Chapter 3 empirically tests some of the predictions from the models. First, using a panel of U.S. adoptions from 50 countries over the period 1977-2011, we find that U.S. adoption from a sending nation is negatively associated with rising household income but positively associated with growing child population in the country, confirming our predictions. Second, based on survey data of adoptive parents, we jointly estimate the demand for three adoption alternatives. The methodology accounts for correlation across alternatives and addresses the endogeneity of price. The estimation results suggest a negative effect of price on demand and a positive effect of subsidies on the number of foster care adoptions although the effects are diminishing with household income.