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Demographic Transition and Economic Welfare: The Role of Humanitarian Aid

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  • Stephen M. Miller

    (University of Nevada, Las Vegas and University of Connecticut)

  • Kyriakos C. Neanidis

    (University of Manchester)

Abstract

This paper considers the effects of humanitarian aid on economic welfare through a demographic transition channel. We develop a two-period overlapping generations model where reproductive agents face a non-zero probability of death in childhood. As adults, agents allocate their time to work, leisure, and child rearing activities. Health status in adulthood exhibits “state dependence,” as it depends on health in childhood. In this framework, we examine the effects of changes in in-kind and monetary humanitarian aid on economic welfare. We conclude that if parents strongly value children, giving monetary aid produces more children and yields higher welfare. This positive welfare effect dominates an indirect negative welfare effect due to a lower growth rate. But, if parents value the quality of their children (health status), they achieve greater utility by in-kind aid, which also lowers fertility and augments economic growth.

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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2012-06.

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Length: 28 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:uct:uconnp:2012-06

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Keywords: Aid; Fertility; Health; Growth; Welfare;

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