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accounting for fertility decline

accounting for fertility decline - Accounting for...

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Accounting for Fertility Decline During the Transition to Growth Matthias Doepke UCLA October 2003 Abstract In every developed country, the economic transition from pre-industrial stagna- tion to modern growth was accompanied by a demographic transition from high to low fertility. Even though the overall pattern is repeated, there are large cross-country variations in the timing and speed of the demographic transition. What accounts for falling fertility during the transition to growth? To answer this question, this paper de- velops a unified growth model which delivers a transition from stagnation to growth, accompanied by declining fertility. The model is used to determine whether gov- ernment policies that affect the opportunity cost of education can account for cross- country variations in fertility decline. Among the policies considered, education sub- sidies have only minor effects, while accounting for child-labor regulations is crucial. Apart from influencing fertility, the policies also have large effects on the evolution of the income distribution in the course of development. JEL Classification: I20, J13, O14, O40 Keywords: Growth, Fertility, Education, Child Labor, Inequality. Workshop participants at Chicago, the SED annual meetings, the Max Planck Institute for Demogra- phy, the Federal Reserve Bank of Minneapolis, Wharton, Pennsylvania, Boston University, Western Ontario, UCLA, Stanford, Rochester, Virginia, UCL, Cambridge, IIES, Illinois, Minnesota, USC, UC Riverside, Duke, and Brown provided many helpful comments. I also benefited from suggestions by Sylvain Dessy, Lee Oha- nian, Daria Zakharova, and Rui Zhao. Financial support by the National Science Foundation is gratefully acknowledged. E-mail: [email protected] Address: UCLA, Department of Economics, 405 Hilgard Ave, Los Angeles, CA 90095-1477.
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1 Introduction Fertility decline is a universal feature of development. Every now industrialized country experienced a demographic transition form high to low fertility, accompanied by a large rise in life expectancy. Most developing countries are in the midst of their demographic transition today. Until a short time ago, economic and demographic change during de- velopment were studied in isolation: researchers studying economic growth tended to abstract from population dynamics, while demographers concentrated on explanations for the demographic transition. More recently, economists have started to recognize im- portant interactions between demographic and economic change, and responded by de- veloping unified models which encompass both the economic takeoff from stagnation to growth, and the demographic transition from high to low fertility. Accounting for fertility behavior is an important challenge for theories of development, because demographic change affects the economic performance of a country in a number of ways. The most familiar concern is that high population growth dilutes the stock of physical capital, and therefore exerts a negative effect on income per capita. A perhaps even more important channel works through the accumulation of human capital. High
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