Rupa Chakrabarti () (Department of Economics, Wellesley College, Wellesley, MA 02181-8260, USA)
Abstract
This paper examines the interrelationship between capital accumulation, fertility, and growth by introducing an endogenous fertility decision into Diamond's (1965) neoclassical growth model. Under the assumptions that children provide old age support and that individuals incur a variable time cost of raising children, it investigates the potential for cyclical fluctuations in the capital-labor ratio and fertility, as well as for development trap phenomena to be observed. It is shown that when capital and labor are highly substitutable in production, there is a unique steady state equilibrium, and either damped or undamped oscillations in fertility and the capital-labor ratio may occur. However, when the elasticity of substitution between capital and labor is less than one, two steady state equilibria may exist; one with a high capital-labor ratio and a high rate of population growth, and the other with a lower capital-labor ratio as well as a lower population growth rate. The former is a saddle, while the latter may be either a source or a sink. In the latter case development traps are possible.
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Article provided by Springer in its journal Economic Theory.
Find related papers by JEL classification: E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical E20 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data) E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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