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We study the impact of family size on intermediate and long-term outcomes using twin births as an exogenous source of variation in family size in an unusually rich dataset. Similar to recent studies, we find no evidence of a causal effect on long-term outcomes and show that not taking selection effects into account will likely overstate the effects. We do, however, find a small but significant negative impact of family size on grades in compulsory and secondary school among children who are likely to be vulnerable to further restrictions on parental investments.

Social scientists have for a long time been interested in how early experiences determine children's long-term welfare (e.g. Haveman and Wolfe, 1995). One example is the relationship between family size and the outcomes of children, where theory proposes a “quantity–quality trade-off”: when increasing the quantity of children parents are forced to decrease their investments per child (e.g. Becker and Lewis, 1973, Willis, 1973 and Becker and Tomes, 1976).1 The seemingly robust empirical finding that increased family size adversely affects children's outcomes (e.g. Björklund et al., 2004, Hanushek, 1992 and Holmlund, 1988) has however recently been questioned by studies arguing that more complex empirical strategies are needed to identify causal effects of family size. We follow the approach study by Black et al. (2005) who used twin births as an exogenous source of variation in family size and found no effect of family size on the amount of education completed. In addition to replicating their findings, we analyze a broader set of outcomes ranging from childhood to adulthood using high quality data on entire Swedish birth cohorts. Intermediate outcomes (such as grades) are interesting as indicators on performance and well-being during adolescence. They also provide a supplementary test of the quantity–quality trade-off hypothesis. Needless to say, the potential trade-off differs depending on economic circumstances. In developing countries with fertility rates of about six births per woman, malnutrition may be a consequence of sibship size, which could affect long-term economic outcomes. In industrialized countries with fertility rates between one and two, nutrition is in most cases not the issue. Still, parents in richer countries act under a budget constraint (at least in terms of hours available), which may decrease the resources available for each child as family size increases. Even though the effects of family size may work through different mechanisms in different parts of the world, the basic theories suggest there to be universal signs of the trade-off. Still, it is not hard to come up with explanations as to why the effects may actually go in the other direction. Children may stabilize marriages or keep parents at home, which some presume to be beneficial for the upbringing of children. One could also argue that siblings act as role models or inspire each other to progress at school or in other arenas. The net effects of family size must therefore be determined empirically. As already mentioned, recent work questions the conclusions from previous studies. The first objection is methodological: the observed correlation may not reflect causation. For instance, parents with preferences for small families might also be the ones who emphasize education and labor market success for their children. The second objection concerns the quality of data used: most studies are plagued by problems generated by small and often unrepresentative samples, and/or by poor child–parent match rates, making the estimates both imprecise and less reliable. We use detailed Swedish population micro data covering the entire birth cohorts 1972–79 (843,333 individuals) and twin births to address both of these problems. Because twin births are essentially randomly determined they provide an exogenous source of variation in family size that can be used to distinguish causation from correlation.2 Our data come from administrative records and include a wide range of educational and labor market outcomes: grades in all subjects ever taken, GPA in compulsory and secondary school, transitions to higher education, highest degree attained, years of schooling, earnings, employment status, welfare dependence etc. We document effects through the educational system and then later in the labor market. Also, there is rich information on parental characteristics that makes it possible for us to directly investigate whether the effect of family size is stronger for parents with limited resources, as suggested by the seminal work by Becker and others. Judging from recent empirical work, it seems that the jury is still out. Angrist et al. (2006) combine several instrumentation strategies on Israeli data and state that the results are “remarkably stable in showing no evidence of a quantity–quality trade-off”.3Black et al. (2007a) find negative effects of sibship size on IQ in Norway. Qian (2006) argues that the family size effect on school enrolment varies with birth order in China, and Caceres (2006) finds inconclusive evidence on a number of outcomes in the US. Rosenzweig and Zhang (2006) find negative effects on parental investments in education in China. Grawe (2008) finds evidence of a trade-off between family size and several child outcomes including achievement scores. Similar to Black et al. (2005) and Angrist et al. (2006) we find no effect of family size on long-term educational attainment or labor market outcomes. The analysis also shows that one risks overstating the impact of family size unless endogeneity is handled; OLS estimations suggest a substantial correlation between sibship size and all the outcomes considered. There is, however, some evidence that family size affects grades in groups that are likely to be vulnerable to reductions in parental investments: in large hosts of siblings, at higher parities and for children to low-educated parents. Furthermore, we find clearer impacts on subjects where parental investments are more likely to be influential. The rest of this paper is structured as follows. In Section 2 we discuss data and the institutional background concerning Sweden's educational system and family policies. Section 3 presents our empirical strategy. Estimation results can be found in Section 4. Concluding remarks are given in Section 5.

This paper investigates the effect of family size on children's educational and labor market outcomes in Sweden. As in other countries there is a strong correlation between family size and intermediate as well as long-run individual outcomes. Similar to other recent studies (Black et al., 2005 and Angrist et al., 2006), we find that most of the correlations do not have a causal interpretation. There is, however, some evidence that family size affects grades in compulsory and secondary education. The results give some support to the trade-off hypothesis: the impact is larger among children in more exposed positions (large sibships, high birth order, low-educated parents). Also, family size seems to be more influential in subjects where homework assistance is more important. But taken together, the evidence presented in this paper suggests that family size only plays a minor role in determining children's outcomes. Our data are very rich, both in terms of the number of observations and concerning the variety of outcome variables available. Since the effects appear to be relatively small and only present for certain types of outcomes, detecting them may require large datasets of high quality. Our results are roughly in line with the results on IQ presented in Black et al. (2007a). As discussed above, it may seem strange that family size would have so little impact on the children. On the other hand, the period during which children require the most attention is relatively short. One possible interpretation of the findings is therefore that while an unplanned increase in family size may imply restrictions that affect the older siblings negatively at some point during adolescence (causing lower grades), there is still time for parents, children and society to correct this behavior so that there are no clear long-term traces of family size.