Fertility , Human Capital and the "Wealth of Nations (original) (raw)
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A general equilibrium model that characterizes the gap between optimal and equilibrium fertility and investment in human capital is developed. The aggregate production function exhibits increasing returns to population arising from specialization, but households face a quantity–quality trade-off when choosing their fertility and how much education these children receive. We show that equilibrium fertility is too low and investment per child is too high, in contrast to a current planner who internalizes the externality of current fertility on the next generation's productivity. We next introduce mortality of young adults in the model and assume that households have a precautionary demand for children. Human capital investment lowers next generation mortality. This model endogenously generates a demographic transition but, since households do not internalize the negative effects of human capital on mortality, the equilibrium demographic transition takes place many years later than...
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The aim of this paper is to develop a model which incorporates the elements that are crucial for the determination of population dynamics in poor countries -child labor and intergenerational flows from children to parents. This model shows that when income decreases, fertility rates increase; a correlation which cannot be obtained by the regular models of demographic transition, in which there is a positive correlation between income and fertility rates. The main advantage of this model is that it better fits the data and the socioeconomic context of the poor countries. The parent-children relationship is part of a whole set of values and social norms that evolve over time and are affected by changes in the economic environment. Intergenerational transfers from parents to children are not due to an intrinsic value, which is independent and invariant to economic changes. JEL classification: J13; O11; O16; O40.
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Altruistic parents rationally choose fertility and human capital investments in their children. A rising rate of return to human capital investment and a conditional external effect in human capital investment produce: (1) two development regimes, a Malthusian regime of high fertility and no human capital investment and a perpetual growth regime of low fertility and rising human capital, (2) conditional human capital convergence within regimes, (3) a demographic transition to economic growth, and (4) accelerating growth. As richer countries grow, the conditional external effect continually raises the rate of return on human capital and causes a demographic transition to economic growth by Malthusian countries.