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Declining fertility and economic well-being: Do education and health ride to the rescue?

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  • Prettner, Klaus
  • Bloom, David E.
  • Strulik, Holger

Abstract

It is widely argued that declining fertility slows the pace of economic growth in industrialized countries through its negative effect on labor supply. There are, however, theoretical arguments suggesting that the effect of falling fertility on effective labor supply can be offset by associated behavioral changes. We formalize these arguments by setting forth a dynamic consumer optimization model that incorporates endogenous fertility as well as endogenous education and health investments. The model shows that a fertility decline induces higher education and health investments that are able to compensate for declining fertility under certain circumstances. We assess the theoretical implications by investigating panel data for 118 countries over the period 1980 to 2005 and show that behavioral changes partly mitigate the negative impact of declining fertility on effective labor supply.

Suggested Citation

  • Prettner, Klaus & Bloom, David E. & Strulik, Holger, 2013. "Declining fertility and economic well-being: Do education and health ride to the rescue?," Labour Economics, Elsevier, vol. 22(C), pages 70-79.
  • Handle: RePEc:eee:labeco:v:22:y:2013:i:c:p:70-79
    DOI: 10.1016/j.labeco.2012.07.001
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    Cited by:

    1. Koichi Fukumura & Kohei Nagamachi & Yasuhiro Sato & Kazuhiro Yamamoto, 2017. "Demographics, Immigration, and Market Size," CIRJE F-Series CIRJE-F-1059, CIRJE, Faculty of Economics, University of Tokyo.
    2. Bloom, David E. & Sousa-Poza, Alfonso, 2013. "Ageing and Productivity: Introduction," IZA Discussion Papers 7205, Institute for the Study of Labor (IZA).
    3. repec:got:cegedp:139 is not listed on IDEAS
    4. Garloff, Alfred & Wapler, Rüdiger, 2016. "Labour shortages and replacement demand in Germany : the (non)-consequences of demographic change," IAB Discussion Paper 201605, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Prettner, Klaus & Strulik, Holger, 2018. "Trade and productivity: The family connection redux," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 276-291.
    6. Annarita BALDANZI & Alberto BUCCI & Klaus PRETTNER, 2016. "The Effects of Health Investments on Human Capital and R&D-Driven Economic Growth," Departmental Working Papers 2016-17, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    7. repec:eee:joecag:v:7:y:2016:i:c:p:106-122 is not listed on IDEAS
    8. Kuhn, Michael & Prettner, Klaus, 2016. "Growth and welfare effects of health care in knowledge-based economies," Journal of Health Economics, Elsevier, vol. 46(C), pages 100-119.
    9. Bloom, David E. & Kuhn, Michael & Prettner, Klaus, 2015. "The contribution of female health to economic development," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 02/2015, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
    10. Bloom, David E. & Sousa-Poza, Alfonso, 2013. "Ageing and productivity," FZID Discussion Papers 63-2012, University of Hohenheim, Center for Research on Innovation and Services (FZID).
    11. repec:spr:jopoec:v:31:y:2018:i:1:d:10.1007_s00148-017-0654-z is not listed on IDEAS
    12. Klaus Prettner, 2012. "Public education, technological change and economic prosperity: semi-endogenous growth revisited," PGDA Working Papers 9012, Program on the Global Demography of Aging.
    13. Prettner, Klaus & Trimborn, Timo, 2012. "Demographic change and R&D-based economic growth: Reconciling theory and evidence," Center for European, Governance and Economic Development Research Discussion Papers 139, University of Goettingen, Department of Economics.
    14. David E. Bloom & Mathew McKenna & Klaus Prettner, 2018. "Demography, Unemployment, Automation, and Digitalization: Implications for the Creation of (Decent) Jobs, 2010–2030," NBER Working Papers 24835, National Bureau of Economic Research, Inc.
    15. Garloff, Alfred & Wapler, Rüdiger, 2016. "Labour Shortages and Replacement Demand in Germany. The (Non-)Consequences of Demographic Change," Annual Conference 2016 (Augsburg): Demographic Change 145497, Verein für Socialpolitik / German Economic Association.
    16. FUKUMURA Koichi & NAGAMACHI Kohei & SATO Yasuhiro & YAMAMOTO Kazuhiro, 2017. "Demographics, Immigration, and Market Size," Discussion papers 17103, Research Institute of Economy, Trade and Industry (RIETI).
    17. Alfred Garloff & Rüdiger Wapler, 2013. "Are the Number of Skilled Workers Running Out in Germany? The (Non)-Consequences of Demographic Change," ERSA conference papers ersa13p854, European Regional Science Association.
    18. Baldanzi, Annarita & Bucci, Alberto & Prettner, Klaus, 2017. "Children's health, human capital accumulation, and R&D-based economic growth," Hohenheim Discussion Papers in Business, Economics and Social Sciences 01-2017, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    19. Attar, M. Aykut, 2013. "Growth and Demography in Turkey: Economic History vs. Pro-Natalist Rhetoric," MPRA Paper 47275, University Library of Munich, Germany.
    20. Koichi Fukumura & Kohei Nagamachi & Yasuhiro Sato & Kazuhiro Yamamoto, 2017. "Demographics, Immigration, and Market Size," CIRJE F-Series CIRJE-F-1048, CIRJE, Faculty of Economics, University of Tokyo.

    More about this item

    Keywords

    Demographic change; Effective labor supply; Human capital; Population health; Economic growth;

    JEL classification:

    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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