Fertility, Heterogeneity and the Golden Rule

Gregory Ponthiere

No 1165, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: Phelps's (1961) Golden Rule states an unambiguous relationship be- tween optimal capital intensity and fertility: a rise in fertility decreases the optimal capital intensity, because a higher fertility increases the in- vestment required to sustain a given capital to labour ratio (i.e., the cap- ital dilution effect). Using a matrix population model embedded in a two-period OLG setting, we examine the robustness of that relationship to the partitioning of the population into 2 subpopulations having dis- tinct fertility behaviors. We derive the optimal accumulation rule in that framework, and we show that, unlike what prevails under a homogeneous population, a rise in fertility does not necessarily reduce the Golden Rule capital intensity, but increases it when the composition effect induced by the fertility change outweighs the standard capital dilution effect pre- vailing under a fixed partition of the population. We also explore the robustness of these results to a finer description of heterogeneity, that is, a partitioning of the population into a larger number of subpopulations.

Keywords: Golden Rule; capital accumulation; fertility; OLG models; matrix population models; heterogeneity (search for similar items in EconPapers)
JEL-codes: E13 E21 E22 J13 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-dem, nep-dge, nep-gro and nep-lab
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Journal Article: Fertility, heterogeneity, and the Golden Rule (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:glodps:1165

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