The Effect of Fertility Reduction on Economic Growth

Abstract

We assess quantitatively the effect of exogenous reductions in fertility on output per capita. Our simulation model allows for effects that run through schooling, the size and age structure of the population, capital accumulation, parental time input into child-rearing, and crowding of fixed natural resources. The model is parameterized using a combination of microeconomic estimates, data on demographics and natural resource income in developing countries, and standard components of quantitative macroeconomic theory. We apply the model to examine the effect of a change in fertility from the UN medium-variant to the UN low-variant projection, using Nigerian vital rates as a baseline. For a base case set of parameters, we find that such a change would raise output per capita by 5.6 percent at a horizon of 20 years, and by 11.9 percent at a horizon of 50 years.

CID Working Paper

251

Keywords

Fertility, Population size, Age structure, Child quality, Worker experience, Labor force participation, Capital accumulation, Natural resources, Income per capita

JEL Classification

E17, J11, J13, J18, J21, J22, J24, O11, O13, O55