Fertility, human capital, and macroeconomic performance: long-term interactions and short-run dynamics

A. F. Darrat and D. A. Yousef

Applied Financial Economics, 2004, vol. 14, issue 8, 537-554

Abstract: Long-run interactions and short-run dynamics among the fertility rate, the accumulation of human capital and macroeconomic performance are examined in several developing countries. While fertility and human capital influence how fast countries grow as traditionally believed, it is argued that both of these growth-promoting factors may themselves be driven by income changes. Past research also neglects the theoretical possibility that the growth consequences of fertility and human capital are inherently slow to develop and require broader models that incorporate long- as well as short-term effects. Two main inferences emerge from the empirical analysis: (a) there exists a robust long-term (cointegrating) relation linking together fertility, human capital and economic growth in all countries studied. Thus, the failure of previous studies to account for the underlying long-term relation could seriously bias their inferences regarding the impact of fertility and/or human capital on economic growth in developing countries, and (b) coherent evidence is also obtained from a whole range of tests and models supportive of a pivotal role of human capital accumulation in shaping macroeconomic performance in the sample.

Date: 2004
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DOI: 10.1080/0960310042000233854

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