Human capital, fertility and growth under borrowing constraints

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Human capital, fertility and growth under borrowing constraints

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Author ERasmo Papagni (University of Naples II)

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Erasmo Papagni

Abstract

In this paper we investigate economic growth in economies where households face liquidity constraints, and young agents rely on the family to finance their investments in education. We analyze the type of family aid in which youths can borrow because their parents guarantee the loan repayment with their income. In an OLG model of economic growth, it is shown how multiple equilibria can arise. A stable trap of low-development is characterized by high fertility rates and low investment in human capital. On the other hand, economies with a sufficiently low starting rate of fertility grow according to a process that may describe a demographic transition. In this case, borrowing constraints gradually vanish and the process of growth reaches a steady state characterized by the optimality of fertility and schooling choices. Econometric evidence on the significant roles of family income and size, and credit constraints among the determinants of international secondary school enrollment rates is provided to support the main hypotheses of the model.

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Paper provided by EconWPA in its series GE, Growth, Math methods with number 0205001.

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Date of creation: 01 May 2002
Date of revision: 03 May 2002
Handle: RePEc:wpa:wuwpge:0205001

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Find related papers by JEL classification:
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

This paper has been announced in the following NEP Reports:

NEP-ALL-2002-06-13 (All new papers)
NEP-LAB-2002-06-13 (Labour Economics)

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Michael A. Clemens, 2004. "The Long Walk to School: International education goals in historical perspective," Development and Comp Systems 0403007, EconWPA. [Downloadable!]
Other versions:
- Michael Clemens, 2004. "The Long Walk to School: International Education Goals in Historical Perspective," Working Papers 37, Center for Global Development. [Downloadable!]

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