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The Political Economy and the Interaction between Endogenous Fertility and Inequality

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  • Andreas Schäfer

Abstract

We simulate a two period olg-model with heterogeneous agents. Parents receive utility from quantity and quality of their offspring. Generating a trade-off between the former and the latter, an increasing wage rate leads to higher opportunity costs, lower fertility, and higher quality of the children. All this leads to an intergenerational persistence in fertility decisions and wages. We show that growth increases inequality and fertility differentials controlled for the initial distribution of wealth. Furthermore, we endogenize redistribution by implementing a median voter-system. Due to fertility differentials the median-voter moves from upper to lower income percentiles.

Suggested Citation

  • Andreas Schäfer, 2004. "The Political Economy and the Interaction between Endogenous Fertility and Inequality," DEGIT Conference Papers c009_041, DEGIT, Dynamics, Economic Growth, and International Trade.
  • Handle: RePEc:deg:conpap:c009_041
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    File URL: http://degit.sam.sdu.dk/papers/degit_09/C009_041.pdf
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    More about this item

    Keywords

    OLG-model; endogenous fertility; intergenerational persistence; inequality;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • I2 - Health, Education, and Welfare - - Education
    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General

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