Many youth decisions appear to have profound effects on later economic well-being and on the well-being of subsequent generations since the poverty these individuals face as adults places their own children in an unfavorable development environment. In order to understand better the structure of these decisions, this project proposes (1) to define carefully the economic opportunity set of youth, particularly youth from low income families, and (2) to identify the choice mechanisms youth employ to select from among these opportunities. The study will examine learning and attitude formation mechanisms that are associated with higher quality decisions in later childhood. A self-control model of youth decision making will be developed, incorporating recent advances in principal- agent models. Parental influences on the youth's schooling and fertility decision processes will also be modeled. Models of teenage schooling and fertility decisions will be developed, in order to separate causal relationships from simple correlations due to common causal linkages with a third factor. An important focus of the study will be the development of a model of teenage fertility. A fertility-avoidance model will be developed that stresses the cost of avoiding fertility, in contrast to traditional economic models that focus on the quantity/quality tradeoff. By developing and estimating structural models of the youth's environment and his or her choice mechanisms, the research should lead to a deeper understanding of the behavior of youth, raising the possibility of meaningful social intervention, should that be desirable. An crucial element in understanding youth behavior, whether education or fertility, is identifying the set of opportunities that the youth face. A major activity in this project is to define carefully the school, market, and home possibilities available to the youth. The primary data base for this and later analyses will be the National Longitudinal Surveys of Youth, a national longitudinal sample of youth 14 to 21, initiated in 1979. In the final stages of the analysis, direct estimation of the linkage of teenage traits and circumstances and subsequent economic well-being will be estimated using the longitudinal aspect of the NLS.
