Working Paper: NBER ID: w13680
Authors: Larry E. Jones; Alice Schoonbroodt
Abstract: The Barro-Becker model is a simple intuitive model of fertility choice. In its original formulation, however, it has not been very successful at reproducing the changes in fertility choice in response to decreased mortality and increased income growth that demographers have emphasized in explaining the demographic transition. In this paper we show that this is due to an implicit assumption that number and utility of children are complements, which is a byproduct of the high intertemporal elasticity of substitution (IES) typically assumed in the fertility literature. We show that, not only is this assumption not necessary, but both the qualitative and quantitative properties of the model in terms of fertility choice change dramatically when substitutability and high curvature are assumed. To do so, we first derive analytical comparative statics and perform quantitative experiments. We find that if IES is less than one, model predictions of changes in fertility amount to about two-thirds of those observed in U.S. data since 1800. There are two major sources to these predicted changes, the increase in the growth rate of productivity which accounts for about 90 percent of the predicted fall in fertility before 1880, and changes in mortality which account for 90 percent of the predicted change from 1880 to 1950.
Keywords: No keywords provided
JEL Codes: E13; J11; J13; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| IES < 1 (C20) | changes in fertility (J13) |
| increase in productivity growth (O49) | population growth (J11) |
| increase in productivity growth (O49) | fertility (J13) |
| IES > 1 (F02) | increase in productivity growth increases fertility (O49) |
| IES = 1 (C20) | increase in productivity growth has no effect on fertility (O49) |
| IES < 1 (C20) | increase in productivity growth decreases fertility (O49) |
| reduction in youth mortality (J13) | increases in surviving fertility (J13) |
| reduction in youth mortality (J13) | increases in population growth rates (J11) |
| increasing expected working life (J26) | increases population growth rates (J11) |
| increasing expected working life (J26) | decreases surviving fertility (J13) |