The Transition to Market Economies in an Endogenous Growth Model with Altruistic Agents

Jie Zhang

Scandinavian Journal of Economics, 1999, vol. 101, issue 1, 11-31

Abstract: This paper considers an endogenous transition from a self‐sufficient traditional economy to a market economy and its consequences on fertility and growth. The transition can occur if private intergenerational transfers are unable to secure old‐age consumption as adequately as savings on capital markets; otherwise individuals stay in the traditional economy unless the mass‐production technology in the market economy is sufficiently more advanced than individually accessible technologies. Markets emerge only if per capita output exceeds a certain level given a fixed cost of forming markets. The transition reduces fertility and promotes growth under plausible restrictions. JEL Classification: E20; J13; O10

Date: 1999
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