Working Papers, Bar-Ilan University, Department of Economics 2015-07
Since the seminal work of Becker, the dynamics of endogenous fertility has been based on the trade-off faced by parents between the quantity and the quality of their children. However, in developing countries, when child labor is an indispensable source of household income, parents actually incur a negative cost for having an extra child, so that the trade-off disappears. The purpose of this paper is to restore the Beckerian quantity-quality trade-off when intergenerational transfers are upstream, so as to keep fertility endogenous. We do that by adding a negative "sibship size effect" on human capital formation to the standard Becker model. With a simple specification, we obtain multiplicity of steady states or, more fundamentally, the possibility of a jump from a state with high fertility and low income to a state with low fertility and high income, triggered by a continuous increase in the productivity of human capital formation.
Endogenous fertility Intergenerational transfers Human capital formation Demographic transition