The Long-run Effects of Household Liquidity Constraints and Taxation on Fertility, Education, Saving, and Growth

This paper investigates economic growth under liquidity constraints by taking into account the choices of fertility, human capital and saving. In a model of four overlapping generations, parents are altruistic towards their offspring and finance their education investment. The government provides education subsidies to young adult parents and levies taxes on income of the adult generation. Sensitivity analysis on borrowing limits and tax parameters highlights effects with opposite sign on the main endogenous variables at steady state. A lift in liquidity constraints decreases savings and capital accumulation and this effect is responsible for the ambiguous sign of comparative statics on the rate of fertility and on human capital investment. From model simulation, we derive an inverted U-shaped curve relating the borrowing limit with fertility, education and growth, meaning that financial reforms in the less developed countries have positive effects on the economy in the long-run, even if they raise fertility and reduce savings. Greater government subsidies to human capital investments and lower income taxes have positive effects on savings and fertility. The same parameters present ambiguous effects on education investments and growth. Numerical simulations show that a) human capital investment has an inverted U-shaped relation with income taxes and education subsidies; b) economic growth decreases with greater income taxes and increases with higher education subsidies.-

The Long-run Effects of Household Liquidity Constraints and Taxation on Fertility, Education, Saving and Growth

This paper investigates economic growth under liquidity constraints by taking into account the choices of fertility, human capital and saving. In a model of four overlapping generations, parents are altruistic towards their offspring and finance their education investment. The government provides education subsidies to young adult parents and levies taxes on income of the adult generation. Sensitivity analysis on borrowing limits and tax parameters highlights effects with opposite sign on the main endogenous variables at steady state. A lift in liquidity constraints decreases savings and capital accumulation and this effect is responsible for the ambiguous sign of comparative statics on the rate of fertility and on human capital investment. From model simulation, we derive an inverted U-shaped curve relating the borrowing limit with fertility, education and growth, meaning that financial reforms in the less developed countries have positive effects on the economy in the long-run, even if they raise fertility and reduce savings. Greater government subsidies to human capital investments and lower income taxes have positive effects on savings and fertility. The same parameters present ambiguous effects on education investments and growth. Numerical simulations show that a) human capital investment has an inverted U-shaped relation with income taxes and education subsidies ; b) economic growth decreases with greater income taxes and increases with higher education subsidies. Jel codes: O40, O16, J13, D91.Borrowing constraints, taxation, endogenous population, economic growth

Human capital, fertility and growth under borrowing constraints

In this paper we investigate economic growth in economies where households face liquidity constraints, and young agents rely on the family to finance their investments in education. We analyze the type of family aid in which youths can borrow because their parents guarantee the loan repayment with their income. In an OLG model of economic growth, it is shown how multiple equilibria can arise. A stable trap of low-development is characterized by high fertility rates and low investment in human capital. On the other hand, economies with a sufficiently low starting rate of fertility grow according to a process that may describe a demographic transition. In this case, borrowing constraints gradually vanish and the process of growth reaches a steady state characterized by the optimality of fertility and schooling choices. Econometric evidence on the significant roles of family income and size, and credit constraints among the determinants of international secondary school enrollment rates is provided to support the main hypotheses of the model.OLG, Human capital, Multiple equilibria

Fertility Choice and Financial Development

We study the consequences of broader access to credit and to capital markets on household's decisions over the number of children. In a life-cycle model of choice with forward and backward caring between parents and children, we analyze the effects of relaxing adults' borrowing constrains and broadening the opportunities for financial investment, and show how the sign of these effects depends on the role of children as a normal or inferior good in parents' preferences. We estimate the quantitative implications of our theoretical model on data from 145 countries over the period 1980-2006. Empirical results indicate that improved access to credit reduces fertility in poor countries and increases fertility in high-income countries. The effect of the development of capital markets on the number of children is negative in low-income countries and positive in the rich. When the analysis includes public pensions the main results remain the same. We also estimate the effect of the real interest rate, which proves significant and negative.Fertility, Financial Markets Development, Old-Age Security.

Fertility Transitions in Developing Countries: Convergence, Timing, and Causes

This communication studies the dynamics of fertility in 180 countries in the period 1950 2015 and investigates the determinants of the onset of fertility transitions. We nd evidence of convergence in three groups of countries, and distinguish the trans- itioning countries from those not transitioning. The estimation of the year of onset of the fertility transition is followed by an econometric analysis of the causes of this event. Instrumental-variable estimates show that increasing female education and reduced infant mortality are important determinants of fertility decline, while per-capita GDP has probably worked in the opposite direction. These results are conrmed by the application of Lewbels (2012) methods where identication is based on heteroskedasticity

Long‑term barriers to global fertility convergence

After WWII, the demographic transition exhibited features of convergence between developing countries and the forerunner countries with low fertility. Although today fertility is low in the majority of countries, significant differences persist. In this article, I study club convergence of fertility in 190 countries over the period 1950 to 2018. First, I apply a novel econometric method for convergence analysis and club clustering. I find no evidence of global fertility convergence, and I classify the 190 countries into four clubs. I further classify countries into two clubs at the beginning of the period and identify a club of countries transitioning from high to low fertility. Second, I interpret fertility convergence clubs as a feature of the long-term process of economic development and estimate an ordered probit model of the probability that a country enters one of three clubs characterized by high, medium, and low barriers to global fertility convergence. Here, the focus is on ancestral fundamental factors of diversity in economic development. Estimates show a statistically significant inverted U-shaped relationship between interpersonal population diversity and the probability of lower barriers, consistent with the literature on diversity and development. Estimates also highlight that genetic distance to the USA and years since the Neolithic transition to agriculture cause higher barriers to fertility decline

Fertility Transitions in Developing Countries: Convergence, Timing, and Causes

This paper studies the dynamics of fertility in 180 countries in the period 195

Scientific research, externalities and Economic growth

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ACADEMIC RESEARCH, SOCIAL INTERACTIONS AND ECONOMIC GROWTH

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Social Rewards in Science and Economic Growth

In this paper we put forward a model of basic research and long-run economic growth in which the incentives of social reward to scientific work may produce increasing returns and multiple equilibria. The state organizes production of new knowledge - a public good that improves firms technology - with taxes on the private sector. Scientists compete with one another to attain priority over a discovery and be awarded both a real prize and prestige in the scientific community. Also, scientists derive job motivation from dedication to science which provides social status. Analysis of the model shows, on the one hand, a low equilibrium where the economy is endowed with a small science sector, researchers have high relative income but low prestige, and competition for discoveries is weak. On the other hand, there is a high equilibrium where the economy has a large science sector, scientists obtain for new findings high prestige but lower relative salaries and, as the e¤ect of creative destruction is strong, there is fierce competition among researchers. Comparative statics shows that if the scientific infrastructure is poor, policies that increase the marginal benefits from a discovery have perverse e¤ects, while policies aimed at improving the selection mechanism of researchers work well. The same policies have opposite effects at the high steady state.