Demographic Transition and Economic Welfare: The Role of Humanitarian Aid
Stephen M. Miller
University of Nevada, Las Vegas - Department of Economics; University of Connecticut - Department of Economics
Kyriakos C. Neanidis
University of Manchester - School of Social Sciences
February 24, 2012
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.
Number of Pages in PDF File: 27
Keywords: aid, fertility, health, growth, welfare
JEL Classification: C23, F35, F43, I12, O41working papers series
Date posted: April 7, 2012
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo3 in 5.520 seconds