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Efficiency with Endogenous Population Growth

  • Mikhail Golosov

    ()

    (Massachusetts Institute of Technology)

  • Larry E. Jones

    ()

    (University of Minnesota)

  • Michèle Tertilt

    ()

    (Stanford University)

In this paper, we generalize the notion of Pareto-efficiency to make it applicable to environments with endogenous populations. Two efficiency concepts are proposed, P-efficiency and A-efficiency. The two concepts differ in how they treat potential agents that are not born. We show that these concepts are closely related to the notion of Pareto-efficiency when fertility is exogenous. We then prove versions of the first welfare theorem assuming that decision making is efficient within the dynasty. We discuss two sets of sufficient conditions for noncooperative equilibria of family decision problems to be efficient. These include the Barro and Becker model as a special case. Finally, we study examples of equilibrium settings in which fertility decisions are not efficient, and classify them into ones where inefficiencies arise inside the family and ones where they arise across families.

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Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 05-012.

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Date of creation: Mar 2006
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Handle: RePEc:sip:dpaper:05-012
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  1. Philippe Michel & Bertrand Wigniolle, 2007. "On Efficient Child Making," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00185259, HAL.
  2. Gary S. Becker & Robert J. Barro, . "A Reformulation of the Economic Theory of Fertility," University of Chicago - Population Research Center 85-11, Chicago - Population Research Center.
  3. Mikhail Golosov & Larry E. Jones & Michele Tertilt, 2004. "Efficiency with Endogenous Population Growth," NBER Working Papers 10231, National Bureau of Economic Research, Inc.
  4. Fudenberg, Drew & Levine, David, 1983. "Subgame-perfect equilibria of finite- and infinite-horizon games," Journal of Economic Theory, Elsevier, vol. 31(2), pages 251-268, December.
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  8. Broome, John, 2004. "Weighing Lives," OUP Catalogue, Oxford University Press, number 9780199243761, March.
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  10. Matthias Doepke, 2001. "Accounting for Fertility Decline During the Transition to Growth," UCLA Economics Working Papers 804, UCLA Department of Economics.
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  13. Eckstein, Zvi & Wolpin, Kenneth I., 1985. "Endogenous fertility and optimal population size," Journal of Public Economics, Elsevier, vol. 27(1), pages 93-106, June.
  14. J. Ignacio Conde-Ruiz & Eduardo L. Giménez & Mikel Pérez-Nievas, 2010. "Millian Efficiency with Endogenous Fertility," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 154-187.
  15. Ehrlich, Paul R. & Ehrlich, Anne H., 2002. "Population, development, and human natures," Environment and Development Economics, Cambridge University Press, vol. 7(01), pages 158-170, February.
  16. Partha Dasgupta, 1995. "The Population Problem: Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 33(4), pages 1879-1902, December.
  17. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1987. "Population policy and individual choice: a theoretical investigation," Research reports 60, International Food Policy Research Institute (IFPRI).
  18. Raut, L. K., 1990. "Capital accumulation, income distribution and endogenous fertility in an overlapping generations general equilibrium model," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 123-150, November.
  19. Dasgupta, Partha S, 1969. "On the Concept of Optimum Population," Review of Economic Studies, Wiley Blackwell, vol. 36(107), pages 295-318, July.
  20. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  21. Blackorby, Charles & Bossert, Walter & Donaldson, David, 2002. "Utilitarianism and the theory of justice," Handbook of Social Choice and Welfare, in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 11, pages 543-596 Elsevier.
  22. Scotchmer, Suzanne, 1997. "On price-taking equilibria in club economies with nonanonymous crowding," Journal of Public Economics, Elsevier, vol. 65(1), pages 75-88, July.
  23. Assaf Razin & Efraim Sadka, 1995. "Population Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262181606, June.
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  25. Fernando Alvarez, 1999. "Social Mobility: The Barro-Becker Children Meet the Laitner-Loury Dynasties," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 65-103, January.
  26. Harford, Jon D, 1998. "The Ultimate Externality," American Economic Review, American Economic Association, vol. 88(1), pages 260-65, March.
  27. John Broome, 2003. "Representing an ordering when the population varies," Social Choice and Welfare, Springer, vol. 20(2), pages 243-246, March.
  28. Nerlove, Marc & Raut, Lakshmi K., 1993. "Growth models with endogenous population: A general framework," Handbook of Population and Family Economics, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 20, pages 1117-1174 Elsevier.
  29. Blackorby, Charles & Bossert, Walter & Donaldson, David, 1995. "Intertemporal Population Ethics: Critical-Level Utilitarian Principles," Econometrica, Econometric Society, vol. 63(6), pages 1303-20, November.
  30. Michele Tertilt, 2005. "Polygyny, Fertility, and Savings," Journal of Political Economy, University of Chicago Press, vol. 113(6), pages 1341-1370, December.
  31. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
  32. Lakshmi K. Raut, 1996. "Subgame perfect manipulation of children by overlapping generations of agents with two-sided altruism and endogenous fertility," Labor and Demography 9604003, EconWPA.
  33. J. Ignacio Conde-Ruiz & Eduardo L. Giménez & Mikel Pérez-Nievas, . "Millian Efficiency with Endogenous Fertility," Working Papers 2004-13, FEDEA.
  34. Streufert, Peter A., 1993. "Markov-perfect equilibria in intergenerational games with consistent preferences," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 929-951.
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