Accounting for Fertility Decline During the Transition to Growth

PWP-CCPR-2001-013

Abstract

Every industrialized country once underwent a transition from Malthusian stagnation to growth, 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 fertility decline that accompanies the transition. This paper explores whether differences in policies that affect the opportunity cost of education, namely child-labor restrictions and education subsidies, can account for these differences. A model is developed which delivers an endogenous transition from Malthusian stagnation to growth. A calibrated version of the model shows that educational policies have large effects on the fertility transition. While the effects of education subsidies are minor, accounting for child-labor regulations is crucial. The same policies that affect fertility decline also have large effects on the evolution of the income distribution in the course of development.