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Declining fertility and economic well-being: do education and health ride to the rescue?

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  • Klaus Prettner

    ()
    (Harvard Center for Population and Development Studies)

  • David E. Bloom

    ()
    (Harvard School of Public Health)

  • Holger Strulik

    ()

Abstract

It is widely argued that declining fertility slows the pace of economic growth through its negative effect on labor supply. There are, however, theoretical arguments suggesting that the effect of falling fertility on effective labor supply can be offset by the associated behavioral changes. We formalize these arguments by setting forth a dynamic consumer optimization model that incorporates endogenous fertility as well as endogenous educational and health investments. The model shows that a fertility decline induces higher education and health investments that are able to compensate for declining fertility under certain circumstances. We assess the theoretical implications by investigating panel data for 118 countries over the period 1980 to 2005 and show that behavioral changes partly mitigate the negative impact of declining fertility on effective labor supply.

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Paper provided by Program on the Global Demography of Aging in its series PGDA Working Papers with number 8412.

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Date of creation: Jan 2012
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Handle: RePEc:gdm:wpaper:8412

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Keywords: demographic change; effective labor supply; human capital; population health; economic growth;

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References

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Cited by:
  1. Prettner, Klaus, 2012. "Public education, technological change and economic prosperity: semi-endogenous growth revisited," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 65414, Verein für Socialpolitik / German Economic Association.
  2. Prettner, Klaus & Trimborn, Timo, 2012. "Demographic change and R&D-based economic growth: Reconciling theory and evidence," Center for European, Governance and Economic Development Research Discussion Papers 139, University of Goettingen, Department of Economics.
  3. Attar, M. Aykut, 2013. "Growth and Demography in Turkey: Economic History vs. Pro-Natalist Rhetoric," MPRA Paper 47275, University Library of Munich, Germany.
  4. Bloom, David E. & Sousa-Poza, Alfonso, 2013. "Ageing and Productivity: Introduction," IZA Discussion Papers 7205, Institute for the Study of Labor (IZA).
  5. Bloom, David E. & Sousa-Poza, Alfonso, 2013. "Ageing and productivity," FZID Discussion Papers 63-2012, University of Hohenheim, Center for Research on Innovation and Services (FZID).
  6. Prettner, Klaus & Trimborn, Timo, 2012. "Demographic change and R&D-based economic growth: Reconciling theory and evidence," Center for European, Governance and Economic Development Research Discussion Papers 139, University of Goettingen, Department of Economics.
  7. Alfred Garloff & Rüdiger Wapler, 2013. "Are the Number of Skilled Workers Running Out in Germany? The (Non)-Consequences of Demographic Change," ERSA conference papers ersa13p854, European Regional Science Association.

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