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The Political Economy and the Interaction between Endogenous Fertility and Inequality

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  • Andreas Schäfer
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    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.

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    File URL: http://degit.sam.sdu.dk/papers/degit_09/C009_041.pdf
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    Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c009_041.

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    Length: 35 pages
    Date of creation: Jun 2004
    Handle: RePEc:deg:conpap:c009_041
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    Web page: http://degit.sam.sdu.dk/
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    1. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
    2. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
    3. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-867, June.
    4. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    5. Gary S. Becker & Kevin M. Murphy & Robert Tamura, 1994. "Human Capital, Fertility, and Economic Growth," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 323-350 National Bureau of Economic Research, Inc.
    6. Oded Galor & David N. Weil, 1993. "The Gender Gap, Fertility, and Growth," NBER Working Papers 4550, National Bureau of Economic Research, Inc.
    7. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
    8. Roland Benabou, 1996. "Inequality and Growth," NBER Working Papers 5658, National Bureau of Economic Research, Inc.
    9. Dahan, M & Tsiddon, D, 1996. "Demographic Transition, Income Distribution and Economic Growth," Papers 42-96, Tel Aviv - the Sackler Institute of Economic Studies.
    10. Michael Kremer & Daniel Chen, 2000. "Income-distribution Dynamics with Endogenous Fertility," NBER Working Papers 7530, National Bureau of Economic Research, Inc.
    11. Oded Galor and David N. Weil, 1998. "From Malthusian Stagnation to Modern Growth," Working Papers 98-26, Brown University, Department of Economics.
    12. Owen, Ann L. & Weil, David N., 1998. "Intergenerational earnings mobility, inequality and growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 71-104, February.
    13. Tomas Kögel, 2004. "Did the association between fertility and female employment within OECD countries really change its sign?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(1), pages 45-65, February.
    14. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    15. DE LA CROIX, David & DOEPKE, Matthias, "undated". "Inequality and growth: why differential fertility matters," CORE Discussion Papers RP 1676, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    16. Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
    17. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
    18. Anand, Sudhir & Kanbur, S. M. R., 1993. "Inequality and development A critique," Journal of Development Economics, Elsevier, vol. 41(1), pages 19-43, June.
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