Technological Progress and Population Growth: Do we have too few children?

Do we have too few children? We intend to address this question. In developed countries, the fertility rate has declined since WWII. This may cause a slowdown in the growth of GDP in developed countries. However, important factors for the well-being of individuals are per capita variables, like per capita growth and per capita consumption. In turn, the rate of technological progress determines the growth rates of per capita variables. If the population size is increasing, the labour inputs for R&D activity increase, and thus speed up technological progress. As individuals do not take account of this positive effect when deciding the number of their own children, the number of children may become smaller than the socially optimal number of children. However, an increase in the number of children reduces the assets any one child owns: that is, there is a capital dilution effect. This works in the opposite direction. We examine this issue using an endogenous growth model where the head of a dynastic family decides the number of children.Technological Progress, Fertility, R&D

A Non-Unitary Discount Rate Model

The standard economic model of intertemporal decision making assumes that a single discount rate applies equally to discount (dis)utility from all different sources. However, studies such as psychology and behavioral economics have provided evidence that people might discount (dis)utility from different sources at different rates. This paper develops a simple model where the agent discounts utility from consumption at a different rate from disutility of labor supply. We show that in our non-unitary discount rate model, the preferences of the agent are time-inconsistent. The source of the time inconsistency is the difference between relative impatience with consumption and labor supply. It is shown that the policy effects in our model are quite different from those in the standard model. For example, when the agent discounts utility from consumption at a higher rate than the disutility of labor supply, the Friedman rule (the zero nominal interest rate) is no longer optimal. We also make comparisons between our results and those obtained in a model with a time variable discount rate where the preferences are time-inconsistent. It is also shown that the policy effects in our model are quite different from those in a model with a time variable discount rate.Non unitary discount rate, Tax policies, Time-inconsistency, Friedman rule.

Conformism and Structural Change

We study structural change in a simple, two-sector endogenous growth model and show that the presence of commodity-specific consumption externalities can be a source of structural change. When the degrees of consumption externalities are different between different goods, the two sectors grow at different rates, whereas the aggregate economy exhibits balanced growth in the sense that capital stock and expenditure grow at the same constant rate. Under the more restrictive condition such that the degrees of consumption externalities are the same, structural change does not occur. We also show that the dependence of the benchmark consumption levels on the past consumption is crucial for the divergent patterns of structural change across countries.