UCLA

In every developed country, the economic transition from pre-industrial stagnation to modem growth was accompanied by a demographic transition from high to low fertility. Even though the overall pattern is repeated, there are large cross-country variations in the timing and speed of the demographic transition. What accounts for falling fertility during the transition to growth? To answer this question, this paper develops a unified growth model that delivers a transition from stagnation to growth, accompanied by declining fertility. The model is used to determine whether government policies that affect the opportunity cost of education can account for cross-country variations in fertility decline. Among the policies considered, education subsidies are found to have only minor effects, while accounting for child labor regulation is crucial. Apart from influencing fertility, the policies also determine the evolution of the income distribution in the course of development.