Differential Fertility, Human Capital, and Development

Using micro-data from 48 developing countries, this article studies changes in cross-sectional patterns of fertility and child investment over the demographic transition. Before 1960, children from larger families obtained more education, in large part because they had richer and more educated parents. By century’s end, these patterns had reversed. Consequently, fertility differentials by income and education historically raised the average education of the next generation, but they now reduce it. Relative to the level of average education, the positive effect of differential fertility in the past exceeded its negative effect in the present. While the reversal of differential fertility is unrelated to changes in GDP per capita, women’s work, sectoral composition, or health, roughly half is attributable to rising aggregate education in the parents’ generation. The data are consistent with a model in which fertility has a hump-shaped relationship with parental skill, due to a corner solution in which low-skill parents forgo investment in their children.As the returns to child investment rise, the peak of the relationship shifts to the left, reversing the associations under study.