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Income-Distribution Dynamics with Endogenous Fertility

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  • Daniel Chen
  • Michael Kremer

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 fertility differential increases 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. Copyright 2002 by Kluwer Academic Publishers
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Suggested Citation

  • Daniel Chen & Michael Kremer, 1999. "Income-Distribution Dynamics with Endogenous Fertility," American Economic Review, American Economic Association, vol. 89(2), pages 155-160, May.
  • Handle: RePEc:aea:aecrev:v:89:y:1999:i:2:p:155-160
    Note: DOI: 10.1257/aer.89.2.155
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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