Low Fertility and Economic Growth

Ronald Lee, University of California, Berkeley
Andrew Mason, University of Hawaii at Manoa

The objective of this paper is to examine how fertility influences economic prospects in post-demographic transition economies from both a theoretical and empirical perspective. We rely on National Transfer Account estimates of the age patterns of critical economic flows for 23 high- and low-income countries. We show that the consumption-maximizing fertility rate is equal to the fertility rate that maximizes the support ratio only under unrealistic assumptions. In an economy with capital, the fertility rate that maximizes per capita consumption is lower than the rate that maximizes the support ratio. The fertility rate that most favors public sector finances is lower than the fertility rate that maximizes consumption. In every country analyzed the consumption maximizing fertility rate is near but below replacement fertility. Very low fertility has substantial negative effects and government finances. Externalities to childbearing may be important and their existence precludes a definitive determination of optimal fertility.

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Presented in Session 148: Population Change and Development in LDCs