A Portfolio Approach to Mortality Shocks and Fertility Choice: Theory and Evidence from Africa
CentER Discussion Paper Series 2013-051
44 Pages Posted: 18 Sep 2013
Date Written: September 16, 2013
The effects of the HIV/AIDS epidemic on fertility in Africa remains ill understood. To align the contrasting findings of recent empirical research, we develop a portfolio model that captures the potential trade-off between "quantity" and "quality" of offspring. According to this theoretical model, the overall impact of mortality shocks on fertility is heterogeneous, and involves changes in human capital investment strategies. A key prediction is that investment switching and fertility impacts are conditional on income levels. We use African panel data to test the implications of the model, and find strong support for key model predictions. In particular, the impact of HIV prevalence on both fertility and human capital investments varies with income in a manner that is consistent with model predictions.
Keywords: HIV/AIDS, Fertility, Portfolio, Development
JEL Classification: D8, I12, J13
Suggested Citation: Suggested Citation