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A Contribution to the Economic Theory of Fertility

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  • Cordoba, Juan Carlos
  • Ripoll, Marla

Abstract

The evidence strongly suggests a robust negative relationship between income and fertility, and a positive relationship between income and longevity. This is puzzling for standard dynamic models. For instance, altruistic models that use the most standard preferences in macro --time separable CRRA with low elasticity of intertemporal substitution (EIS)-- correctly predict a positive longevity-income relationship for rich individuals, but also predict a positive fertility-income relationship, contrary to the data. We show that a non-separable formulation of preferences that allows for a low EIS but a high "elasticity of intergenerational substitution" (EGS) can simultaneously account for the evidence of declining demand for children and increasing demand for longevity as income increases. The model with a single elasticity cannot account for both. Our results suggests a major role for a new parameter in macro, the EGS. While the EIS mostly influences short-term economic decisions, the EGS influences mostly long-term economic choices.

Suggested Citation

  • Cordoba, Juan Carlos & Ripoll, Marla, 2011. "A Contribution to the Economic Theory of Fertility," Staff General Research Papers Archive 33899, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:33899
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    Cited by:

    1. Cordoba, Juan Carlos & Ripoll, Marla, 2012. "Barro-Becker with Credit Frictions," Staff General Research Papers Archive 35531, Iowa State University, Department of Economics.
    2. Córdoba, Juan Carlos & Ripoll, Marla, 2013. "What explains schooling differences across countries?," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 184-202.
    3. Juan Carlos Córdoba & Marla Ripoll, 2019. "The Elasticity of Intergenerational Substitution, Parental Altruism, and Fertility Choice," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(5), pages 1935-1972.
    4. Juan Cordoba & Marla Ripoll & Xiying Liu, 2019. "Accounting for the International Quantity-Quality Trade-off," 2019 Meeting Papers 156, Society for Economic Dynamics.
    5. Cordoba, Juan Carlos, 2012. "Children and the Wealth of Nations," Staff General Research Papers Archive 34989, Iowa State University, Department of Economics.
    6. Cordoba, Juan C. & Liu, Xiying, 2016. "Malthusian Stagnation is Efficient," ISU General Staff Papers 201611270800001010, Iowa State University, Department of Economics.
    7. Juan Carlos Córdoba & Marla Ripoll, 2016. "Intergenerational Transfers and the Fertility–Income Relationship," Economic Journal, Royal Economic Society, vol. 126(593), pages 949-977, June.
    8. Cordoba, Juan Carlos & Liu, Xiying, 2018. "Efficiency with Endogenous Population and Fixed Resources," ISU General Staff Papers 201811010700001062, Iowa State University, Department of Economics.
    9. Cordoba, Juan Carlos & Liu, Xiying, 2014. "Altruism, fertility and risk," ISU General Staff Papers 201404050700001022, Iowa State University, Department of Economics.
    10. Liu, Xiying, 2015. "Optimal population and policy implications," ISU General Staff Papers 201501010800005546, Iowa State University, Department of Economics.
    11. Juan Carlos Cordoba, 2015. "Children, Dynastic Altruism and the Wealth of Nations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 774-791, October.
    12. Juan Carlos Cordoba, 2015. "Children, Dynastic Altruism and the Wealth of Nations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 774-791, October.

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    More about this item

    Keywords

    Fertility; Altruism; Non-separable Preferences; Frictions;
    All these keywords.

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • D1 - Microeconomics - - Household Behavior
    • D6 - Microeconomics - - Welfare Economics
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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