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Declining Fertility and Economic Well-Being: Do Education and Health Ride to the Rescue?

Klaus Prettner (), David Bloom and Holger Strulik ()

No 6527, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: It is widely argued that declining fertility slows the pace of economic growth in industrialized countries through its negative effect on labor supply. There are, however, theoretical arguments suggesting that the effect of falling fertility on effective labor supply can be offset by associated behavioral changes. We formalize these arguments by setting forth a dynamic consumer optimization model that incorporates endogenous fertility as well as endogenous education and health investments. The model shows that a fertility decline induces higher education and health investments that are able to compensate for declining fertility under certain circumstances. We assess the theoretical implications by investigating panel data for 118 countries over the period 1980 to 2005 and show that behavioral changes partly mitigate the negative impact of declining fertility on effective labor supply.

Keywords: demographic change; effective labor supply; human capital; population health; economic growth (search for similar items in EconPapers)
JEL-codes: I15 I25 J24 O47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dem, nep-hap and nep-lab
Date: 2012-04
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Journal Article: Declining fertility and economic well-being: Do education and health ride to the rescue? (2013) Downloads
Working Paper: Declining fertility and economic well-being: do education and health ride to the rescue? (2012) Downloads
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