Demographic Transition and Economic Welfare: The Role of Humanitarian Aid

Stephen Miller and Kyriakos Neanidis

Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester

Abstract: This paper considers the effects of humanitarian aid on economic welfare through a demographic transition channel. We develop a two-period overlapping generations model where reproductive agents face a non-zero probability of death in childhood. As adults, agents allocate their time to work, leisure, and child rearing activities. Health status in adulthood exhibits "state dependence", as it depends on health in childhood. In this framework, we examine the effects of changes in inkind and monetary humanitarian aid on economic welfare. We conclude that if parents strongly value children, giving monetary aid produces more children and yields higher welfare. This positive welfare effect dominates an indirect negative welfare effect due to a lower growth rate. But, if parents value the quality of their children (health status), they achieve greater utility by inkind aid, which also lowers fertility and augments economic growth.

Pages: 28 pages
Date: 2012
New Economics Papers: this item is included in nep-dem and nep-dge
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Related works:
Working Paper: Demographic Transition and Economic Welfare: The Role of Humanitarian Aid (2012)
Working Paper: Demographic Transition and Economic Welfare: The Role of Humanitarian Aid (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:man:cgbcrp:164

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