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On the Mechanics of Economic Development and Non-Development

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  • Holger Strulik

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Abstract

Young adults observe the current interest rate, wage rate, and child mortality and decide about savings and the quantity and quality of their children. Human capital is produced as an external effect of expenditure on child quality and its production is subject to decreasing returns. Depending on the economic environment individuals decide on one of three different lifestyles. The first one generates stabilization at a low income level and high population growth, the second one generates the demographic transition and the third one perpetual growth of a modern economy. If the switch from Malthusian expansion in size towards demographic transition is not generated endogenously, a properly timed development program on education can manage the escape from the low-income equilibrium.

Suggested Citation

  • Holger Strulik, 1999. "On the Mechanics of Economic Development and Non-Development," Quantitative Macroeconomics Working Papers 19911, Hamburg University, Department of Economics.
  • Handle: RePEc:ham:qmwops:19911
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    File URL: http://www.rrz.uni-hamburg.de/wst/qmwps/qm799.ps
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