Inequality and Growth: Why Differential Fertility Matters
Northwestern University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)
David De la Croix
Catholic University of Louvain (UCL) - Institut de Recherches Economiques et Sociales (IRES); Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)
American Economic Review, Vol. 93, No. 4, September 2003
We develop a new theoretical link between inequality and growth. In our model, fertility and education decisions are interdependent. Poor parents decide to have many children and invest little in education. A mean-preserving spread in the income distribution increases the fertility differential between the rich and the poor, which implies that more weight gets placed on families who provide little education. Consequently, an increase in inequality lowers average education and, therefore, growth. We find that this fertility-differential effect accounts for most of the empirical relationship between inequality and growth.
Keywords: Growth, Inequality, Differential Fertility, Human Capital, Education
JEL Classification: J13, O40Accepted Paper Series
Date posted: September 15, 2003
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