A Contribution to the Economic Theory of Fertility

Juan Cordoba and Marla Ripoll

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: The evidence strongly suggests a robust negative relationship between income and fertility, and a positive relationship between income and longevity. This is puzzling for standard dynamic models. For instance, altruistic models that use the most standard preferences in macro --time separable CRRA with low elasticity of intertemporal substitution (EIS)-- correctly predict a positive longevity-income relationship for rich individuals, but also predict a positive fertility-income relationship, contrary to the data. We show that a non-separable formulation of preferences that allows for a low EIS but a high "elasticity of intergenerational substitution" (EGS) can simultaneously account for the evidence of declining demand for children and increasing demand for longevity as income increases. The model with a single elasticity cannot account for both. Our results suggests a major role for a new parameter in macro, the EGS. While the EIS mostly influences short-term economic decisions, the EGS influences mostly long-term economic choices.

Keywords: Fertility; Altruism; Non-separable Preferences; Frictions (search for similar items in EconPapers)
JEL-codes: D00 D1 D6 D9 J1 O1 R2 (search for similar items in EconPapers)
Date: 2011-06-20
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (20)

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http://www2.econ.iastate.edu/papers/p13899-2011-06-20.pdf (application/pdf)
http://cordobas.org/cetf.pdf (application/pdf)

Related works:
Working Paper: A contribution to the economic theory of fertility (2011)
Working Paper: A Contribution to the Economic Theory of Fertility (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:33899

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