Growth and Fertility in the Long Run

This paper develops a theory that accounts for three stylized facts concerning growth and fertility in the long run. First, economies start in a “Malthusian Regime” with stagnant living standards and high fertility. Second, ultimately a “Growth Regime” is reached in which per capita income grows at near-constant rates, and fertility is low. Third, the speed and timing of the fertility decline during the transition from the Malthusian Regime to the Growth Regime differs across countries. I show that this development pattern can be reproduced by a theory consisting of three key elements: an agricultural production function, an industrial production function, and the quantity-quality model of fertility. The transition from Malthusian stagnation to growth and the ensuing fall in fertility is an endogenous feature of the model that occurs inevitably, regardless of initial conditions or policies. The speed of the fertility transition depends on policies that affect the opportunity cost of education, namely education subsidies and child-labor restrictions. I thank the members of my thesis committee Robert Lucas (chair), Gary Becker, Edward Prescott, and Robert Townsend for their guidance and encouragement. Workshop participants at Chicago, the SED annual meetings, the Max Planck Institute for Demography, the Federal Reserve Bank of Minneapolis, and many other institutions provided many helpful comments. I also benefited from suggestions by Daria Zakharova, Sylvain Dessy, and Rui Zhao. Financial support by the University of Chicago and the Frank H. Knight Fellowship Fund is gratefully acknowleged. E-mail: [email protected]. Address: 5118 S Kimbark Ave, Chicago, IL 60615.