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Income-distribution Dynamics with Endogenous Fertility

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  • Michael Kremer
  • Daniel Chen

Abstract

Developing countries with highly unequal income distributions, such as Brazil or South Africa, face an uphill battle in reducing inequality. Educated workers in these countries have a much lower birthrate than uneducated workers. Assuming children of educated workers are more likely to become educated, this tends to increase the proportion of unskilled workers, reducing their wages, and thus their opportunity cost of having children, creating a vicious cycle. A model incorporating this effect generates multiple steady-state levels of inequality, suggesting that in some circumstances, temporarily increasing access to educational opportunities could permanently reduce inequality. Empirical evidence suggests that the fertility differential between the educated and uneducated is greater in less equal countries, consistent with the model.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7530.

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Date of creation: Feb 2000
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Publication status: published as American Economic Review, Vol. 89, no. 2 (May 1999): 155-160.
Handle: RePEc:nbr:nberwo:7530

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  1. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  2. Galor, Oded & Zang, Hyoungsoo, 1997. "Fertility, income distribution, and economic growth: Theory and cross-country evidence," Japan and the World Economy, Elsevier, vol. 9(2), pages 197-229, May.
  3. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
  4. Lam, David, 1986. "The Dynamics of Population Growth, Differential Fertility, and Inequality," American Economic Review, American Economic Association, vol. 76(5), pages 1103-16, December.
  5. Mark Bils & Peter J. Klenow, 1998. "Does Schooling Cause Growth or the Other Way Around?," NBER Working Papers 6393, National Bureau of Economic Research, Inc.
  6. Kremer, Michael & Chen, Daniel L, 2002. " Income Distribution Dynamics with Endogenous Fertility," Journal of Economic Growth, Springer, vol. 7(3), pages 227-58, September.
  7. Dahan, Momi & Tsiddon, Daniel, 1998. " Demographic Transition, Income Distribution, and Economic Growth," Journal of Economic Growth, Springer, vol. 3(1), pages 29-52, March.
  8. Deininger, K & Squire, L, 1996. "Measuring Income Inequality : A New Data-Base," Papers 537, Harvard - Institute for International Development.
  9. Daniel Chen & Michael Kremer, 1999. "Income-Distribution Dynamics with Endogenous Fertility," American Economic Review, American Economic Association, vol. 89(2), pages 155-160, May.
  10. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1984. "Income distribution policies with endogenous fertility," Journal of Public Economics, Elsevier, vol. 24(2), pages 221-230, July.
  11. Chu, C Y Cyrus & Koo, Hui-Wen, 1990. "Intergenerational Income-Group Mobility and Differential Fertility," American Economic Review, American Economic Association, vol. 80(5), pages 1125-38, December.
  12. Morand, Olivier F, 1999. " Endogenous Fertility, Income Distribution, and Growth," Journal of Economic Growth, Springer, vol. 4(3), pages 331-49, September.
  13. Moav, Omer, 2001. "Cheap Children and the Persistence of Poverty," CEPR Discussion Papers 3059, C.E.P.R. Discussion Papers.
  14. Birdsall, Nancy, 1988. "Economic approaches to population growth," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 12, pages 477-542 Elsevier.
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