Human Capital, Mortality and Fertility: A Unified Theory of the Economic and Demographic Transition

56 Pages Posted: 20 Jul 2007

See all articles by Matteo Cervellati

Matteo Cervellati

University of Bologna - Department of Economics; Institute for the Study of Labor (IZA); Instituto de Análisis Económic (IAE) Barcelona

Uwe Sunde

Ludwig Maximilian University of Munich (LMU)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2007

Abstract

This paper provides a unified theory of the economic and demographic transition. Individuals make optimal decisions about fertility, education of their children and the type and intensity of the investments in their own education. These decisions are affected by different dimensions of mortality and technological progress which change endogenously during the process of development. The model generates an endogenous transition from a regime characterized by limited human capital formation, little longevity, high child mortality, large fertility and a sluggish income and productivity growth to a modern growth regime in which lower net fertility is associated with the acquisition of human capital and improved living standards. Unlike previous models, the framework emphasizes the education composition of the population in terms of the equilibrium share of educated individuals, and differential fertility related to education. The framework explores the roles of different dimensions of mortality, wages and schooling in triggering the transition. The dynamics of the model are consistent with empirical observations and stylized facts that have been difficult to reconcile so far. For illustration we simulate the model and discuss the novel predictions using historical and cross-country data.

Keywords: long-term development, demographic transition, endogenous life expectancy, child mortality, heterogeneous human capital, technological change, industrial revolution

JEL Classification: E10, J10, O10, O40, O41

Suggested Citation

Cervellati, Matteo and Sunde, Uwe, Human Capital, Mortality and Fertility: A Unified Theory of the Economic and Demographic Transition (July 2007). IZA Discussion Paper No. 2905, Available at SSRN: https://ssrn.com/abstract=1000885

Matteo Cervellati (Contact Author)

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy
+39-2092605 (Phone)
+39-2092664 (Fax)

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/

Instituto de Análisis Económic (IAE) Barcelona

Barcelona, Bellaterra 08193
Spain

Uwe Sunde

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

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