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Birth Rates, Factor Shares, and Growth

Author

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  • Andrés Álvarez
  • Camilo Gómez
  • Hernando Zuleta
  • Camilo Acosta

Abstract

Increases in capital shares affect the marginal productivity of capital, stimulating capital accumulation. Can a decrease in labor shares reduce the supply of labor? We explore this question using a model of fertility inspired by Caldwell (1982) and Boldrin and Jones (2002). Individuals may transfer wealth to the future in two ways: by saving and by having children. Raising children has a cost in terms of current consumption but generates future income through intergenerational transfers. In this setting, a redistribution of income from labor to capital affects the return of savings and children in opposite ways and generates incentives for more savings and fewer children. Two pieces of evidence motivate our model. First, recent historical evidence shows that the increases in capital shares that preceded the Industrial Revolution coincided with falling birth rates. Second, for current developed economies, changes in labor shares correlate positively with changes in fertility rates, and negatively with changes in saving rates.

Suggested Citation

  • Andrés Álvarez & Camilo Gómez & Hernando Zuleta & Camilo Acosta, 2019. "Birth Rates, Factor Shares, and Growth," Documentos CEDE 17318, Universidad de los Andes, Facultad de Economía, CEDE.
    • Handle: RePEc:col:000089:017318
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    References listed on IDEAS

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    1. Nakamura, Hideki, 2023. "Difficulties in finding middle-skilled jobs under increased automation," Macroeconomic Dynamics, Cambridge University Press, vol. 27(5), pages 1179-1201, July.

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    More about this item

    Keywords

    birth rates; factor shares; growth; biased innovations.;
    All these keywords.

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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