A contribution to the economic theory of fertility


  • ISU General Staff Papers


  • The evidence strongly suggests a robust negative relationship between income and fertility, and a positive relationship between income and longevity. This is puzzling for standard dynamic models. For instance, altruistic models that use the most standard preferences in macro --time separable CRRA with low elasticity of intertemporal substitution (EIS)-- correctly predict a positive longevity-income relationship for rich individuals, but also predict a positive fertility-income relationship, contrary to the data. We show that a non-separable formulation of preferences that allows for a low EIS but a high "elasticity of intergenerational substitution" (EGS) can simultaneously account for the evidence of declining demand for children and increasing demand for longevity as income increases. The model with a single elasticity cannot account for both. Our results suggests a major role for a new parameter in macro, the EGS. While the EIS mostly influences short-term economic decisions, the EGS influences mostly long-term economic choices.

fecha de publicación

  • 2011

Líneas de investigación

  • altruism
  • elasticity of intergeneraltional substitution
  • elasticity of intertemporal substitution
  • fertility
  • frictions
  • non-separable preferences
  • non-separable utility
  • parental altruism


  • 11011