IDEAS home Printed from https://ideas.repec.org/p/gdm/wpaper/8412.html
   My bibliography  Save this paper

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

Author

Listed:
  • Klaus Prettner

    () (Harvard Center for Population and Development Studies)

  • David E. Bloom

    () (Harvard School of Public Health)

  • Holger Strulik

    ()

Abstract

It is widely argued that declining fertility slows the pace of economic growth 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 the associated behavioral changes. We formalize these arguments by setting forth a dynamic consumer optimization model that incorporates endogenous fertility as well as endogenous educational 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

  • Klaus Prettner & David E. Bloom & Holger Strulik, 2012. "Declining fertility and economic well-being: do education and health ride to the rescue?," PGDA Working Papers 8412, Program on the Global Demography of Aging.
  • Handle: RePEc:gdm:wpaper:8412
    as

    Download full text from publisher

    File URL: http://www.hsph.harvard.edu/pgda/WorkingPapers/2012/PGDA_WP_84.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. David E. Bloom & David Canning & Günther Fink, 2010. "Implications of population ageing for economic growth," Oxford Review of Economic Policy, Oxford University Press, vol. 26(4), pages 583-612, Winter.
    2. Eeckhoudt, Louis & Pestieau, Pierre, 2008. "A note on longevity enhancing investment," Economics Letters, Elsevier, vol. 101(1), pages 57-59, October.
    3. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    4. Flavio Cunha & James J. Heckman, 2009. "Human Capital Formation in Childhood and Adolescence," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 7(4), pages 22-28, 01.
    5. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2005. "The More the Merrier? The Effect of Family Size and Birth Order on Children's Education," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 669-700.
    6. Mark R. Rosenzweig & Junsen Zhang, 2009. "Do Population Control Policies Induce More Human Capital Investment? Twins, Birth Weight and China's "One-Child" Policy," Review of Economic Studies, Oxford University Press, vol. 76(3), pages 1149-1174.
    7. Avner Ahituv, 2001. "Be fruitful or multiply: On the interplay between fertility and economic development," Journal of Population Economics, Springer;European Society for Population Economics, vol. 14(1), pages 51-71.
    8. Dierk Herzer & Holger Strulik & Sebastian Vollmer, 2012. "The long-run determinants of fertility: one century of demographic change 1900–1999," Journal of Economic Growth, Springer, vol. 17(4), pages 357-385, December.
    9. Axel BÖRSCH‐SUPAN & Alexander LUDWIG, 2009. "Aging, Asset Markets, and Asset Returns: A View From Europe to Asia," Asian Economic Policy Review, Japan Center for Economic Research, vol. 4(1), pages 69-92, June.
    10. Holger Strulik & Klaus Prettner & Alexia Prskawetz, 2010. "R&D-Based Growth in the Post-Modern Era," VID Working Papers 1009, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
    11. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    12. James J. Heckman & Lance J. Lochner & Petra E. Todd, 2008. "Earnings Functions and Rates of Return," Journal of Human Capital, University of Chicago Press, vol. 2(1), pages 1-31.
    13. David N. Well, 2007. "Accounting for the Effect Of Health on Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 1265-1306.
    14. Carl-Johan Dalgaard & Holger Strulik, 2014. "Optimal Aging And Death: Understanding The Preston Curve," Journal of the European Economic Association, European Economic Association, vol. 12(3), pages 672-701, June.
    15. Joshua R. Goldstein & Michaela Kreyenfeld, 2011. "Has East Germany Overtaken West Germany? Recent Trends in Order‐Specific Fertility," Population and Development Review, The Population Council, Inc., vol. 37(3), pages 453-472, September.
    16. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    17. Joshua R. Goldstein & Tomáš Sobotka & Aiva Jasilioniene, 2009. "The End of “Lowest‐Low” Fertility?," Population and Development Review, The Population Council, Inc., vol. 35(4), pages 663-699, December.
    18. David E. Bloom & David Canning & Günther Fink, 2014. "Disease and Development Revisited," Journal of Political Economy, University of Chicago Press, vol. 122(6), pages 1355-1366.
    19. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-255, March-Apr.
    20. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
    21. David Bloom & David Canning & Günther Fink & Jocelyn Finlay, 2009. "Fertility, female labor force participation, and the demographic dividend," Journal of Economic Growth, Springer, vol. 14(2), pages 79-101, June.
    22. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    23. Joshua Angrist & Victor Lavy & Analia Schlosser, 2010. "Multiple Experiments for the Causal Link between the Quantity and Quality of Children," Journal of Labor Economics, University of Chicago Press, vol. 28(4), pages 773-824, October.
    24. Holger Strulik, 2005. "The Role of Human Capital and Population Growth in R&D‐based Models of Economic Growth," Review of International Economics, Wiley Blackwell, vol. 13(1), pages 129-145, February.
    25. Bloom, David E. & Canning, David & Sevilla, Jaypee, 2004. "The Effect of Health on Economic Growth: A Production Function Approach," World Development, Elsevier, vol. 32(1), pages 1-13, January.
    26. Quamrul H. Ashraf & Ashley Lester & David N. Weil, 2009. "When Does Improving Health Raise GDP?," NBER Chapters, in: NBER Macroeconomics Annual 2008, Volume 23, pages 157-204, National Bureau of Economic Research, Inc.
    27. Gauri Kartini Shastry & David N. Weil, 2003. "How Much of Cross-Country Income Variation is Explained By Health?," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 387-396, 04/05.
    28. Bloom, David E. & Canning, David & Mansfield, Richard K. & Moore, Michael, 2007. "Demographic change, social security systems, and savings," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 92-114, January.
    29. Gruber, Jonathan & Wise, David, 1998. "Social Security and Retirement: An International Comparison," American Economic Review, American Economic Association, vol. 88(2), pages 158-163, May.
    30. Carl‐Johan Dalgaard & Claus Thustrup Kreiner, 2003. "Endogenous Growth: A Knife Edge or the Razor's Edge?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(1), pages 73-86, March.
    31. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    32. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
    33. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
    34. David E. Bloom & David Canning, 2004. "The Health and Wealth of Africa," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 5(2), pages 57-81, April.
    35. Mankiw, N. Gregory & Weil, David N., 1989. "The baby boom, the baby bust, and the housing market," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 235-258, May.
    36. Klaus Prettner & Alexia Prskawetz, 2010. "Demographic change in models of endogenous economic growth. A survey," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 18(4), pages 593-608, December.
    37. Gertler, Mark, 1999. "Government debt and social security in a life-cycle economy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 61-110, June.
    38. Takatoshi ITO, 2009. "Comment on “Aging, Asset Markets, and Asset Returns: A View From Europe to Asia”," Asian Economic Policy Review, Japan Center for Economic Research, vol. 4(1), pages 93-94, June.
    39. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
    40. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
    41. Ben S. Bernanke & Refet S. Gürkaynak, 2002. "Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 11-72, National Bureau of Economic Research, Inc.
    42. Brander, James A & Dowrick, Steve, 1994. "The Role of Fertility and Population in Economic Growth: Empirical Results from Aggregate Cross-National Data," Journal of Population Economics, Springer;European Society for Population Economics, vol. 7(1), pages 1-25.
    43. David N. Weil & Oded Galor, 2000. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond," American Economic Review, American Economic Association, vol. 90(4), pages 806-828, September.
    44. Laitner, John, 2007. "Comment on: David Bloom, David Canning, Rick Mansfield, and Michael Moore's "Demographic change, social security systems, and savings"," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 115-117, January.
    45. Allen Kelley & Robert Schmidt, 1995. "Aggregate population and economic growth correlations: The role of the components of demographic change," Demography, Springer;Population Association of America (PAA), vol. 32(4), pages 543-555, November.
    46. Henriette Engelhardt & Tomas Kögel & Alexia Prskawetz, 2001. "Fertility and women´s employment reconsidered: A macro-level time-series analysis for developed countries, 1960-2000," MPIDR Working Papers WP-2001-021, Max Planck Institute for Demographic Research, Rostock, Germany.
    47. Dalgaard, Carl-Johan & Kreiner, Claus Thustrup, 2001. "Is Declining Productivity Inevitable?," Journal of Economic Growth, Springer, vol. 6(3), pages 187-203, September.
    48. Ashenfelter, Orley & Harmon, Colm & Oosterbeek, Hessel, 1999. "A review of estimates of the schooling/earnings relationship, with tests for publication bias," Labour Economics, Elsevier, vol. 6(4), pages 453-470, November.
    49. Kelley, Allen C. & Schmidt, Robert M., 1995. "Aggregate Population and Economic Growth Correlations: The Role of the Components of Demographic Change," Working Papers 95-37, Duke University, Department of Economics.
    50. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
    51. Mitsuhiro Fukao, 2009. "Comment on “Aging, Asset Markets, and Asset Returns: A View From Europe to Asia”," Asian Economic Policy Review, Japan Center for Economic Research, vol. 4(1), pages 95-96, June.
    52. Wolfgang Lutz & Anne Goujon & Samir K.C. & Warren Sanderson, 2007. "Reconstruction of population by age, sex and level of educational attainment of 120 countries for 1970-2000," Vienna Yearbook of Population Research, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna, vol. 5(1), pages 193-235.
    53. John Cawley & James Heckman & Edward Vytlacil, 1998. "Understanding the Role of Cognitive Ability in Accounting for the Recent Rise in the Economic Return to Education," NBER Working Papers 6388, National Bureau of Economic Research, Inc.
    54. Carl-Johan Dalgaard & Holger Strulik, 2011. "A physiological foundation for the nutrition-based efficiency wage model," Oxford Economic Papers, Oxford University Press, vol. 63(2), pages 232-253, April.
    55. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Prettner, Klaus, 2013. "Public education, technological change and economic prosperity," Center for European, Governance and Economic Development Research Discussion Papers 149, University of Goettingen, Department of Economics.
    2. 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.
    3. Prettner, Klaus, 2012. "Public education and economic prosperity: Semi-endogenous growth revisited," ECON WPS - Working Papers in Economic Theory and Policy 02/2012, TU Wien, Institute of Statistics and Mathematical Methods in Economics, Economics Research Unit.
    4. Strulik, Holger & Prettner, Klaus & Prskawetz, Alexia, 2010. "R\&D-based Growth in the Post-modern Era," Hannover Economic Papers (HEP) dp-457, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    5. Bloom, David E. & Khoury, Alexander & Kufenko, Vadim & Prettner, Klaus, 2020. "Spurring Economic Growth through Human Development: Research Results and Guidance for Policymakers," IZA Discussion Papers 12964, Institute of Labor Economics (IZA).
    6. Gehringer, Agnieszka & Prettner, Klaus, 2019. "Longevity And Technological Change," Macroeconomic Dynamics, Cambridge University Press, vol. 23(4), pages 1471-1503, June.
    7. Klaus Prettner & Timo Trimborn, 2012. "Demographic Change and R&D-based Economic Growth: Reconciling Theory and Evidence," DEGIT Conference Papers c017_006, DEGIT, Dynamics, Economic Growth, and International Trade.
    8. Holger Strulik & Klaus Prettner & Alexia Prskawetz, 2013. "The past and future of knowledge-based growth," Journal of Economic Growth, Springer, vol. 18(4), pages 411-437, December.
    9. Alberto Bucci & Klaus Prettner, 2020. "Endogenous education and the reversal in the relationship between fertility and economic growth," Journal of Population Economics, Springer;European Society for Population Economics, vol. 33(3), pages 1025-1068, July.
    10. Boikos, Spyridon & Bucci, Alberto & Stengos, Thanasis, 2013. "Non-monotonicity of fertility in human capital accumulation and economic growth," Journal of Macroeconomics, Elsevier, vol. 38(PA), pages 44-59.
    11. Colino, Alberto & Benito-Osorio, Diana & Rueda-Armengot, Carlos, 2014. "Entrepreneurship culture, total factor productivity growth and technical progress: Patterns of convergence towards the technological frontier," Technological Forecasting and Social Change, Elsevier, vol. 88(C), pages 349-359.
    12. Bloom, David E. & Canning, David & Kotschy, Rainer & Prettner, Klaus & Schünemann, Johannes, 2018. "Health and Economic Growth: Reconciling the Micro and Macro Evidence," IZA Discussion Papers 11940, Institute of Labor Economics (IZA).
    13. Ken-ichi Hashimoto & Ken Tabata, 2013. "Rising Longevity, Human Capital and Fertility in Overlapping Generations Version of an R&D-based Growth Model," Discussion Paper Series 104, School of Economics, Kwansei Gakuin University, revised May 2013.
    14. Werner, Katharina & Prettner, Klaus, 2015. "Public education and R&D-based economic growth," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112997, Verein für Socialpolitik / German Economic Association.
    15. Bloom, David E. & Chen, Simiao & Kuhn, Michael & McGovern, Mark E. & Oxley, Les & Prettner, Klaus, 2020. "The economic burden of chronic diseases: Estimates and projections for China, Japan, and South Korea," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    16. Baldanzi, Annarita & Bucci, Alberto & Prettner, Klaus, 2021. "Children’S Health, Human Capital Accumulation, And R&D-Based Economic Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 25(3), pages 651-668, April.
    17. Quamrul H. Ashraf & David N. Weil & Joshua Wilde, 2013. "The Effect of Fertility Reduction on Economic Growth," Population and Development Review, The Population Council, Inc., vol. 39(1), pages 97-130, March.
    18. repec:got:cegedp:139 is not listed on IDEAS
    19. Bucci, Alberto, 2013. "Returns to specialization, competition, population, and growth," Journal of Economic Dynamics and Control, Elsevier, vol. 37(10), pages 2023-2040.
    20. Amavilah, Voxi Heinrich, 2014. "Human Knowledge and a Commonsensical Measure of Human Capital: A Proposal," MPRA Paper 57670, University Library of Munich, Germany.
    21. Martin Werding & Sonja Munz & Vera Gács, 2008. "Fertility and Prosperity: Zusammenhänge zwischen Geburtenrate und wirtschaftlicher Entwicklung in ausgewählten Industrieländern," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 42.

    More about this item

    Keywords

    demographic change; effective labor supply; human capital; population health; economic growth;
    All these keywords.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gdm:wpaper:8412. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Cinzia Smothers) The email address of this maintainer does not seem to be valid anymore. Please ask Cinzia Smothers to update the entry or send us the correct email address. General contact details of provider: https://edirc.repec.org/data/degraus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.