Technological Progress and Population Growth: Do we have too few children?
Do we have too few children? We intend to address this question. In developed countries, the fertility rate has declined since WWII. This may cause a slowdown in the growth of GDP in developed countries. However, important factors for the well-being of individuals are per capita variables, like per capita growth and per capita consumption. In turn, the rate of technological progress determines the growth rates of per capita variables. If the population size is increasing, the labour inputs for R&D activity increase, and thus speed up technological progress. As individuals do not take account of this positive effect when deciding the number of their own children, the number of children may become smaller than the socially optimal number of children. However, an increase in the number of children reduces the assets any one child owns: that is, there is a capital dilution effect. This works in the opposite direction. We examine this issue using an endogenous growth model where the head of a dynastic family decides the number of children.
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