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Inequality and Growth: Why Differential Fertility Matters

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Author Info
David de la Croix
Matthias Doepke

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Abstract

We develop a new theoretical link between inequality and growth. In our model, fertility and education decisions are interdependent. Poor parents decide to have many children and invest little in education. A mean-preserving spread in the income distribution increases the fertility differential between the rich and the poor, which implies that more weight gets placed on families who provide little education. Consequently, an increase in inequality lowers average education and, therefore, growth. We find that this fertility-differential effect accounts for most of the empirical relationship between inequality and growth.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 4 (September)
Pages: 1091-1113
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Handle: RePEc:aea:aecrev:v:93:y:2003:i:4:p:1091-1113

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    Other versions:
  2. Kelley, Allen C. & Schmidt, Robert M., 1999. "Economic and Demographic Change: A Synthesis of Models, Findings, and Perspectives," Working Papers 99-01, Duke University, Department of Economics. [Downloadable!]
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  7. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
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  11. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
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  15. Leibowitz, Arleen, 1974. "Home Investments in Children," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages S111-S131, Part II, . [Downloadable!] (restricted)
  16. Alan B. Krueger & Mikael Lindahl, 2000. "Education for Growth: Why and For Whom?," NBER Working Papers 7591, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Michael Kremer & Daniel Chen, 2000. "Income-distribution Dynamics with Endogenous Fertility," NBER Working Papers 7530, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  18. Rangazas, Peter, 2000. "Schooling and economic growth: A King-Rebelo experiment with human capital," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 397-416, October. [Downloadable!] (restricted)
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  1. Stephan Klasen, 2005. "Population Growth, (Per Capita) Economic Growth, and Poverty Reduction in Uganda: Theory and Evidence," Departmental Discussion Papers 125, University of Goettingen, Department of Economics. [Downloadable!]
  2. Fabrice Murtin, 2006. "American Economic Development Since the Civil War or the Virtue of Education," CEP Discussion Papers dp0765, Centre for Economic Performance, LSE. [Downloadable!]
  3. Aiyar, Shekhar & Dalgaard, Carl-Johan & Moav, Omer, 2006. "Technological Progress and Regress in Pre-Industrial Times," CEPR Discussion Papers 5454, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Isaac Ehrlich & Jinyoung Kim, 2004. "The Evolution of Income and Fertility Inequalities over the Course of Economic Development: A Human Capital Perspective," NBER Working Papers 10890, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Andreas Schäfer, 2004. "The Political Economy and the Interaction between Endogenous Fertility and Inequality," DEGIT Conference Papers c009_041, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  6. David de la Croix & Axel Gosseries, 2007. "Population Policy through Tradable Procreation Entitlements," Working Papers 62, ECINEQ, Society for the Study of Economic Inequality. [Downloadable!]
    Other versions:
  7. Concetta, MENDOLICCHIO, 2005. "Gender and private returns to education : a cross-European analysis," Université catholique de Louvain, Département des Sciences Economiques Working Paper 2005056, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
  8. Carlos E. Posada & Eliana Carolina Rubiano, 2007. "El crecimiento económico internacional en la segunda mitad del siglo XX ¿que factores lo determinaron?," BORRADORES DE ECONOMIA 003956, BANCO DE LA REPÚBLICA. [Downloadable!]
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  9. Andreas Schäfer, 2002. "Endogenous Growth with Endogenous Fertility and Social Discrimination in Education," Thuenen-Series of Applied Economic Theory 35, University of Rostock, Institute of Economics, Germany. [Downloadable!]
  10. Lucas Bretschger, 2004. "Natural resource scarcity and long-run development: central mechanisms when conditions are seemingly unfavourable," Economics working paper series 03/29, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  11. Stephan Klasen & David Lawson, 2007. "The Impact of Population Growth on Economic Growth and Poverty Reduction in Uganda," Departmental Discussion Papers 133, University of Goettingen, Department of Economics, revised 25 May 2007. [Downloadable!]
  12. S. Brock Blomberg & Gregory Hess & Athanasios Orphanides, 2004. "The Macroeconomic Consequences of Terrorism," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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  13. Oded Galor & Andrew Mountford, 2008. "Trading Population for Productivity: Theory and Evidence," Working Papers 2008-2, Brown University, Department of Economics. [Downloadable!]
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  14. Joanna Alexopoulos & Tiago V. de V. Cavalcanti, 2006. "Cheap Home Goods And Persistent Inequality," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 165, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
  15. Amparo Castelló-Climent, 2004. "A Reassessment Of The Relationship Between Inequality And Growth: What Human Capital Inequality Data Say?," Working Papers. Serie EC 2004-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
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