Income-Distribution Dynamics with Endogenous Fertility
Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER); Center for Global Development
Daniel L. Chen
Duke University - School of Law
NBER Working Paper No. w7530
Developing countries with highly unequal income distributions, such as Brazil or South Africa, face an uphill battle in reducing inequality. Educated workers in these countries have a much lower birthrate than uneducated workers. Assuming children of educated workers are more likely to become educated, this tends to increase the proportion of unskilled workers, reducing their wages, and thus their opportunity cost of having children, creating a vicious cycle. A model incorporating this effect generates multiple steady-state levels of inequality, suggesting that in some circumstances, temporarily increasing access to educational opportunities could permanently reduce inequality. Empirical evidence suggests that the fertility differential between the educated and uneducated is greater in less equal countries, consistent with the model.
Number of Pages in PDF File: 62working papers series
Date posted: April 18, 2000
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