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Demographic Transition and Economic Welfare: The Role of Humanitarian Aid

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  • Stephen M. Miller

    (University of Nevada, Las Vegas and University of Connecticut)

  • Kyriakos C. Neanidis

    (University of Manchester)

Abstract

This paper considers the effects of humanitarian aid on economic welfare through a demographic transition channel. We develop a two-period overlapping generations model where reproductive agents face a non-zero probability of death in childhood. As adults, agents allocate their time to work, leisure, and child rearing activities. Health status in adulthood exhibits “state dependence,” as it depends on health in childhood. In this framework, we examine the effects of changes in in-kind and monetary humanitarian aid on economic welfare. We conclude that if parents strongly value children, giving monetary aid produces more children and yields higher welfare. This positive welfare effect dominates an indirect negative welfare effect due to a lower growth rate. But, if parents value the quality of their children (health status), they achieve greater utility by in-kind aid, which also lowers fertility and augments economic growth.

Suggested Citation

  • Stephen M. Miller & Kyriakos C. Neanidis, 2012. "Demographic Transition and Economic Welfare: The Role of Humanitarian Aid," Working papers 2012-06, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:2012-06
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    More about this item

    Keywords

    Aid; Fertility; Health; Growth; Welfare;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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