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Published on: September 19, 2017
Endogenous fertility, multiple growth paths, and economic convergence
Journal of Economic Dynamics & Control
|November 1, 1995
Summary
Endogenous fertility choice in optimal growth models can lead to multiple economic steady states. This explains persistent income gaps between rich and poor countries, and the occurrence of development miracles or disasters.
Area of Science:
- Economics
- Economic Growth Theory
- Demographic Economics
Background:
- The Cass-Koopmans optimal growth model traditionally assumes exogenous fertility.
- Persistent income disparities and divergent development paths (miracles/disasters) between nations remain key economic puzzles.
Purpose of the Study:
- To extend the Cass-Koopmans optimal growth model by incorporating endogenous fertility choice.
- To investigate how agent-driven fertility decisions impact capital accumulation and economic growth dynamics.
- To provide a theoretical framework explaining observed income differentials and development outcomes.
Main Methods:
- Theoretical extension of the Cass-Koopmans optimal growth model.
- Mathematical analysis of the model with endogenous fertility.
- Empirical analysis to test for multiple convergence groups.
Main Results:
- Endogenous fertility choice can disrupt the monotonic relationship between capital and the net rate of return on capital.
- The model predicts the emergence of multiple steady states and diverse growth paths.
- Empirical evidence supports the existence of multiple convergence groups, aligning with the theoretical predictions.
Conclusions:
- Endogenous fertility is a crucial factor in understanding economic growth heterogeneity.
- The model offers a parsimonious explanation for persistent income inequality and divergent development trajectories.
- Policy implications may arise from understanding how fertility decisions interact with capital accumulation.
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