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Fertility choice and semi-endogenous growth: where Becker meets Jones

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  • GROWIEC, Jakub

Abstract

Introducing fertility choice into an R&D-based semi-endogenous growth model makes it possible for the economy's long-run growth rate to be again fully endogenously determined. A positive growth rate along the balanced growth path requires a certain knife-edge assumption, though. In the usual framework, it would be the assumption that the intertemporal elasticity of substitution in consumption be exactly unity (IES=1). We argue that such an assumption constitutes the ultimate source of long-run growth in these models; thus, we analyze the alternatives. If one relaxes the IES=1 assumption, and introduces a minimum “subsistence” fertility level to the model, there may (but may not) emerge an asymptotic balanced growth path with positive growth rates, to which the economy eventually converges as levels of variables diverge to infinity. This balanced growth path is either saddle-path stable or completely stable. We also address the issue of the economy's invariance towards fertility-promoting policy within the semi-endogenous growth framework. We conclude that such policy can bring long-run effects only in the knife- edge case of IES=1 type. Jones' policy invariance result is typically consistent with endogenous fertility.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006023.

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Date of creation: 00 Mar 2006
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Handle: RePEc:cor:louvco:2006023

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Keywords: fertility choice; semi-endogenous growth; R&D; long-run dynamics; knife-edge conditions.;

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References

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  1. Connolly, Michelle & Peretto, Pietro F, 2003. " Industry and the Family: Two Engines of Growth," Journal of Economic Growth, Springer, vol. 8(1), pages 115-48, March.
  2. Taiji Harashima, 2005. "An Estimate of the Elasticity of Intertemporal Substitution in a Production Economy," Macroeconomics 0508030, EconWPA.
  3. Jones Charles I., 2001. "Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(2), pages 1-45, August.
  4. Holger Strulik, 2005. "The Role of Human Capital and Population Growth in R&D-based Models of Economic Growth," Review of International Economics, Wiley Blackwell, vol. 13(1), pages 129-145, 02.
  5. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
  6. Robert J. Barro & Gary S. Becker, . "Fertility Choice in a Model of Economic Growth," University of Chicago - Population Research Center 88-8, Chicago - Population Research Center.
  7. Beaudry, Paul & van Wincoop, Eric, 1996. "The Intertemporal Elasticity of Substitution: An Exploration Using a US Panel of State Data," Economica, London School of Economics and Political Science, vol. 63(251), pages 495-512, August.
  8. Favero, Carlo A, 2005. "Consumption, Wealth, the Elasticity of Intertemporal Substitution and Long-Run Stock Market Returns," CEPR Discussion Papers 5110, C.E.P.R. Discussion Papers.
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Cited by:
  1. Spataro, Luca & Renström, Thomas I., 2012. "Optimal taxation, critical-level utilitarianism and economic growth," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 727-738.
  2. Strulik, Holger & Prettner, Klaus & Prskawetz, Alexia, 2012. "The past and future of knowledge-based growth," Center for European, Governance and Economic Development Research Discussion Papers 140, University of Goettingen, Department of Economics.
  3. Chu, Angus C. & Cozzi, Guido, 2011. "Cultural preference on fertility and the long-run growth effects of intellectual property rights," MPRA Paper 29059, University Library of Munich, Germany.
  4. Strulik, Holger & Prettner, Klaus & Prskawetz, Alexia, 2011. "R&D-based growth in the post-modern era," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 04/2011, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
  5. Boikos, Spyridon & Bucci, Alberto & Stengos, Thanasis, 2013. "Non-monotonicity of fertility in human capital accumulation and economic growth," Journal of Macroeconomics, Elsevier, vol. 38(PA), pages 44-59.
  6. Alberto Bucci & Chiara Del Bo, 2009. "On the interaction between public investment and private capital in economic growth," UNIMI - Research Papers in Economics, Business, and Statistics unimi-1092, Universitá degli Studi di Milano.
  7. Bucci, Alberto & Segre, Giovanna, 2011. "Culture and human capital in a two-sector endogenous growth model," Research in Economics, Elsevier, vol. 65(4), pages 279-293, December.
  8. Angus Chu & Guido Cozzi & Chih-Hsing Liao, 2013. "Endogenous fertility and human capital in a Schumpeterian growth model," Journal of Population Economics, Springer, vol. 26(1), pages 181-202, January.
  9. Strulik, Holger & Prettner, Klaus & Prskawetz, Alexia, 2012. "The past and future of knowledge-based growth," Center for European, Governance and Economic Development Research Discussion Papers 140, University of Goettingen, Department of Economics.

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