Banking on fewer children: Financial intermediation, fertility and economic development

Carol Scotese ()

Journal of Population Economics, 1999, vol. 12, issue 4, 567-590

Abstract: This paper shows that financial intermediation can influence fertility and labor allocation decisions by raising market wages. The increase in wages induces some households to abandon "traditional" labor intensive methods of production managed at the household level and supply labor to "modern" sector firms. Since it is optimal for households in the modern sector to have fewer children, the labor allocation decision leads to lower national fertility. A panel VAR using financial intermediation, fertility and industrial employment share data in 87 countries is estimated. The empirical results show that the data are consistent with the theoretical predictions.

Keywords: Financial; intermediation; ·; fertility; ·; economic; development (search for similar items in EconPapers)
JEL-codes: E44 J13 O16 (search for similar items in EconPapers)
Date: 1999-12-16
Note: Received: 20 October 1997/Accepted: 31 August 1998
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Citations: View citations in EconPapers (5)

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