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Inequality and growth: why differential fertility matters

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  • DE LA CROIX, David
  • DOEPKE, Matthias

Abstract

We argue the inequality and growth are linked through differential fertility and the accumulation of human capital. We build an overlapping-generations model in which dynasties differ in their initial endowment with human capital. Growth, the income distribution, and fertility are endogenous. Due to a quantity-quality tradeoff, families with less human capital decide to have more children and invest less in education. When initial inequality is high, large fertility differentials lower the growth rate of average human capital, since poor families who invest little in education make up a large fraction of the population in the next generation. A calibrated model shows that this fertility-differential effect is quantitatively important. We also provide empirical evidence to confirm the links between inequality, differential fertility and growth suggested by the model.
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  • DE LA CROIX, David & DOEPKE, Matthias, 2003. "Inequality and growth: why differential fertility matters," LIDAM Reprints CORE 1676, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:1676
    DOI: 10.1257/000282803769206214
    Note: In : The American Economic Review, 93(4), 1091-1113, 2003
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    More about this item

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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