Why is fertility rising in developed economies? The dynamics of skill composition, fertility and economic growth

Abstract

This paper develops an overlapping generations model that incorporates choice of occupation (education), fertility and how to rear children. We examine the dynamic interplay between occupational structure, economic growth and fertility as an economy moves through two phases distinguished by the skill composition of the workforce. The model exhibits the possibility of multiple equilbria and dynamic behaviour in the second phase that is consistent with a unit elastic version of Diamond (1965). The presence of multiple equilbria explains the observation that while fertility has decreased with per capita income in some countries, per capita income remains low and fertility high in others. By introducing child rearing goods and services, as an alternative to parental time, we explain the recent fertility upturn witnessed in some developed economies. Show more