Fertility, Human Development, and Economic Growth: Long- term Short-term Causal Links

Within the causal structure of economic development, we can distinguish between short-term and long-term causal links. In particular, this study examines long-term short-term causal relations in economic development. We construct a balanced panel for 72 countries over the period from 1980 to 2007 and use panel unit-root and cointegration tests to find the causal structure amongst income, human development, demographic transition, technology and infrastructure, institutions and trade. In estimating the long-run relationship between cointegrated variables, we use the dynamic OLS (DOLS) estimation techniques proposed by Kao and Chiang (2000) in order to avoid spurious regression results introducing leads and lags of one or two years. We find that there are long-term short-term causal links between high income, high human development and low fertility all of which we define as the developed lifestyle. We also find that technology and infrastructure, institutions and economic integration have systematic short-term impacts that promote the developed lifestyle, acting as exogenous processes.