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Inequality and Growth : Why Differential Fertility Matters

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  • DE LA CROIX, David

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • DOEPKE, Matthias

    (departement of Economics, UCLA, Los Angeles)

Abstract

We argue the inequality and growth are linked through differential fertility and the accumulation of human capital. We build an overlapping-generations model in which dynasties differ in their initial endowment with human capital. Growth, the income distribution, and fertility are endogenous. Due to a quantity-quality tradeoff, families with less human capital decide to have more children and invest less in education. When initial inequality is high, large fertility differentials lower the growth rate of average human capital, since poor families who invest little in education make up a large fraction of the population in the next generation. A calibrated model shows that this fertility-differential effect is quantitatively important. We also provide empirical evidence to confirm the links between inequality, differential fertility and growth suggested by the model.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2001008.

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Length: 27
Date of creation: 01 Apr 2001
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Handle: RePEc:ctl:louvir:2001008

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