The child as a family asset? The modelling of the family' economic loss in case of premature child death

Abstract

Purpose: EU policy investing in children involves a social assessment of the high value of household spending on having and bringing up children. Therefore, the question arises as to what loss the household as investor will bear in the event of the child's death, and what the economic value of the child. The research questions are as follows: How to assess the economic importance, economic value of a child in a household? What factors influence this economic value? Is it necessary to model it in time? Design/Methodology/Approach: We present the loss suffered by a household as a result of a child's death, based on selected economic theories and concepts for estimating human life and goods, assuming the child is a good of a given value. We build the model using financial mathematics, discounted cash flow calculations, annuity calculations, as well as social elements and intergenerational transfers. Findings: The obtained results indicate the high economic value of the child for the current, but also - and even the most - the future economic situation of the household. The compensatory awards in liability cases do not cover even the expenses incurred for the lost asset. It may lead to financial instablity of individual and externalisation of loss, especially when it comes to support during old age. Practical Implications: The modelling concept could determine the minimum economic and ethical value of the child from the point of view of the household and allow evaluation in the financial decisions and loss compensation instruments areas, such as life insurance, liablity claims or the systemic policy of supporting fertility and investing in children. Originality/Value: The study offers an in-depth insight into modelling of the household financial loss and valuation of the child.