Demographic Transition and Economic Welfare: The Role of Humanitarian Aid

27 Pages Posted: 7 Apr 2012

See all articles by Stephen M. Miller

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

Date Written: February 24, 2012

Abstract

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.

Keywords: aid, fertility, health, growth, welfare

JEL Classification: C23, F35, F43, I12, O41

Suggested Citation

Miller, Stephen M. and Neanidis, Kyriakos C., Demographic Transition and Economic Welfare: The Role of Humanitarian Aid (February 24, 2012). Available at SSRN: https://ssrn.com/abstract=2010796 or http://dx.doi.org/10.2139/ssrn.2010796

Stephen M. Miller (Contact Author)

University of Nevada, Las Vegas - Department of Economics ( email )

4505 S. Maryland Parkway
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Las Vegas, NV 89154
United States
702-895-3776 (Phone)
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HOME PAGE: http://faculty.unlv.edu/smiller/

University of Connecticut - Department of Economics

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States

Kyriakos C. Neanidis

University of Manchester - School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom
+44-161-275-4832 (Phone)
+44-161-275-4812 (Fax)

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