variety of areas, such as the allocation of public spending to family programs. Concern about these trends has created particular anxiety about possible effects on young children and, in turn, a resurgence of interest in how family care, especially inputs of parental time, affects child outcomes (see Ginther and Pollak, 2004, on the effect of family structure on children’s educational outcomes).

We do not mean to suggest, of course, that families are important only or even primarily because of the role they play in the development of children’s human capital—family life is far richer than any such characterization would imply. For many people, beyond whatever their upbringing may have done to prepare them for a productive life, relationships with family members are a source of deep and continuing joy. It is, however, the contribution families make to their children’s productive capacities that makes them of interest in the context of seeking to understand and account for society’s nonmarket production.

It would be logical to treat the physical production of children—the 4 million infants who are born in the United States each year—as a component of the human capital produced in the home. If some are inclined to question whether these births represent real investment, they might consider the economic situation in year t+20 in the event there were no births in year t! Yet, children are people in their own right, not a commodity to be bought and sold, and many people are uncomfortable with viewing newborn infants as an output to be measured like other outputs. A similar discomfort is manifest, for example, in laws governing adoptions. Many childless couples would be willing to pay a large sum for the opportunity to adopt a child, but laws prohibit their making payments to birth parents in connection with an adoption (other than to cover birth-related expenses).

In the same way that births could be viewed as an investment, it similarly would be logical to treat net immigration to the United States from abroad as an increment to the nation’s stock of human capital. Particularly with birth rates at modest levels in comparison with earlier historical periods, immigration accounts for a substantial share of observed growth in population, and changes in immigration rates can have a significant impact on the growth of a country’s potential labor supply. Indeed, some countries, such as Canada, have consciously structured their immigration policies to favor high-skilled immigrants who can be expected to make especially significant economic contributions. This is not, however, a theme that we pursue further in this report.

Even taking as given the biological production of children and the raw material with which these children are born, parental time inputs are critical to the development of children’s intellectual and emotional readiness to learn. Parental time inputs that create a foundation for learning can be viewed as skill-enhancing investments in human capital. Likewise, family care augments the inputs of the medical care system in the production of health, another investment output that yields a flow of future benefits. It is common practice to treat the skills possessed by those entering the workforce as the product of the educational system, the health of the population to be the product of the medical care system, and so on.

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