Birth Rates, Factor Shares, and Growth

26 Pages Posted: 4 Jul 2019 Last revised: 17 Nov 2019

See all articles by Andrés Álvarez

Andrés Álvarez

Universidad de los Andes - Department of Economics

Camilo Gomez

Universidad de los Andes, Colombia - Department of Economics

Hernando Zuleta

Universidad de los Andes, Colombia

Camilo Acosta

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF)

Date Written: May 23, 2019

Abstract

Increases in capital shares affect the marginal productivity of capital, stimulating capital accumulation. Can a decrease in labor shares reduce the supply of labor? We explore this question using a model of fertility inspired by Caldwell (1982) and Boldrin and Jones (2002). Individuals may transfer wealth to the future in two ways: by saving and by having children. Raising children has a cost in terms of current consumption but generates future income through intergenerational transfers. In this setting, a redistribution of income from labor to capital affects the return of savings and children in opposite ways and generates incentives for more savings and fewer children. Two pieces of evidence motivate our model. First, recent historical evidence shows that the increases in capital shares that preceded the Industrial Revolution coincided with falling birth rates. Second, for current developed economies, changes in labor shares correlate positively with changes in fertility rates, and negatively with changes in saving rates.

Keywords: birth rates, factor shares, growth, biased innovations

JEL Classification: J11, J13, D33, O11, O33

Suggested Citation

Alvarez, Andres and Gomez, Camilo and Zuleta, Hernando and Acosta Mejia, Camilo, Birth Rates, Factor Shares, and Growth (May 23, 2019). Documento CEDE No. 2019-20, Available at SSRN: https://ssrn.com/abstract=3411143 or http://dx.doi.org/10.2139/ssrn.3411143

Andres Alvarez (Contact Author)

Universidad de los Andes - Department of Economics ( email )

Calle 19A No. 1-37 Este
Bloque W, oficina W-816.
Bogota, D. C. 110311
Colombia
+57 1 3394949 (Phone)

HOME PAGE: http://economia.uniandes.edu.co/alvarez

Camilo Gomez

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

Hernando Zuleta

Universidad de los Andes, Colombia ( email )

Carrera Primera # 18A-12
Bogota, DC D.C. 110311
Colombia

Camilo Acosta Mejia

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF) ( email )

Carrera 49 No. 7 South - 50
Medellin
Colombia

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