Explaining International Fertility Differences

Explaining International Fertility Differences - Explaining...

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Explaining International Fertility Di f erences Rodolfo E. Manuelli and Ananth Seshadri Department of Economics June 2007 Abstract Why do fertility rates vary so much across countries? Why are Eu- ropean fertility rates so much lower than American fertility rates? To answer these questions we extend the Barro-Becker framework to in- corporate the decision to accumulate human capital (that determines earnings) and health capital (that determines life span). We f nd that cross-country di f erences in productivity and taxes can go a long way towards explaining the observed di f erences in fertility and mortality. We thank NSF and the Alfred P. Sloan Foundation for f nancial support. We are grateful to Sebnem Kalemli-Ozcan, Kevin Murphy and Jim Walker for their comments. We thank seminar participants at Brown, Chicago-GSB, Houston, Indiana, Rochester, Rice, Stanford and UC-Santa Barbara for their suggestions. 1
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1 Introduction The Question : Fertility and mortality rates vary considerably across coun- tries. While the average family in the U.S. has 2.1 children and has a life expectancy at age 1 of over 78, the average family in Niger has 7.4 children and life expectancy is only 51, the average European family has 1.5 children and life expectancy is 78 Our main objective in this paper is to understand the role played by economic forces in the fertility decisions of the typical Niger and European families, and in the allocation of resources that a f ect life expectancy and schooling. The international evidence is summarized in Figures 1-3. The Motivation :D i f erences in fertility and mortality rates can have a very large impact on output per worker. Our previous work (Manuelli and Seshadri (2007a)) suggests that if countries in the bottom decile of the world income distribution were ‘endowed’ with the US demographics, output per worker in these poor countries would more than double. Moreover, demo- graphic changes also a f ect the dynamics of output and human capital ac- cumulation (Manuelli and Seshadri (2007b)). These results are incomplete since they ignore the endogeneity of demographic variables. In this paper we explore how economic forces a f ect fertility and mortality. The Methodology : Our baseline model builds on Barro and Becker (1989), and incorporates some additional features –quantity and quality of schooling and endogenous life spans– that play a major role in the quantitative pre- dictions of the model. Unlike most other papers that endogenize fertility, we 2
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0 1 2 3 4 5 6 7 8 9 0 5000 10000 15000 20000 25000 30000 35000 40000 GDP per capita Total Fertility Rate Figure 1: Income and Fertility, 2000 go beyond the more common two or three period overlapping generations set- up and incorporate the full life-cycle of the individual’s utility maximization.
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Explaining International Fertility Differences - Explaining...

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