This essay analyzes the economic causes and effects of household decisions concerning fertility, education and child labor when children can supplement family income early in life and must support their parents in old age as adults. Parents, who raise and educate children for both financial and altruistic reasons, will typically choose a too little schooling for the economy to grow when all are poor. High child- raising costs or an educational process which is not sufficiently productive are the main reasons for the existence of a poverty trap with a high population growth rate and little or no schooling. Interventions such as taxes and subsidies can lead to sustained long-term economic growth, with fulltime schooling and a low population growth rate, even without outside aid, if the child-raising costs are not too high and the educational process is at least moderately productive.
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Paper provided by EconWPA in its series HEW with number
0310001.
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