Faculty of Economics, HOKKAI GAKUEN UNIVERSITY
The aim of this paper is to clarify the causes of the poverty trap resulting from a negative correlation between income and fertility, in a manner that is consistent with the data across and within countries. This paper points out that a higher fertility rate is the cause ofthe poverty trap, because of its educational cost aspect.
For useful comments and suggestions, I am indebted to Koichi futagami, associate editor Eric Hanushek, Tatsuro Iwaisako, Akira Momota, Testuo Ono, Yoshiyasu Ono, Makoto Saito, and the anonymous referees of this journal. Of course, any remaining errors are all my own. Citation: Hemmi, Noriyoshi, (2003) "The poverty trap with high fertilityrates." Economics Bulletin, Vol. 9, No. 6 pp. 1−4 Submitted: June 19, 2003. Accepted: October 24, 2003. URL: http://www.economicsbulletin.com/2003/volume9/EB−03I20001A.pdf
1. Introduction It is known well that a high fertility rate is one of the most remarkable features of the developing countries (Birdsall 1988). And the fact is commonly recognized to be one of the serious problems whichdeveloping countries face. 1 This common recognition is drawn from the natural inference that a high fertility rate is not only the result of poverty, but the causes of the poverty. The recent paper, which has the recognition that a high fertility rate is the causes of the poverty, is Kremer and Chen (1999) 2 , in which the inﬂuence by endogenizing fertility rates shows up through the labor market. Inthis paper, we deal with an overlapping generations model similar to Glomm and Ravikumar (1992), in which human capital investment through formal schooling is the engine of growth. However, to investigate a relationship between a fertility rate and educational opportunities created by parents (for example, a quality of schools), in our model the fertility rate is determined endogenously, whereasGlomm and Ravikumar (1992) assume an exogenous population size. In contrast with Kremer and Chen (1999), in this paper, the inﬂuence by endogenizing fertility rates appears in change of a quality of schools (not through the labor market), and this change of the quality of schools aﬀects the eﬀort of children. This process generates multiple steady states. The remainder of the paper is organized asfollows. Section 2 describes the behavior of individuals. The model is solved in Section 3. Section 4 establishes the evolution of human capital and contains the welfare analysis. Section 5 concludes the paper. 2. The Model In this paper, we consider an overlapping generations model in which individuals live for two periods. In the ﬁrst period, the individuals decide the amount of time foraccumulating human capital, given the level of their parents’ human capital and the quality of schools. In the second period, they obtain income and decide consumption volume, fertility rates, and the quality of schools of their children. The preferences of an individual born at time t are represented by lt + ct+1 + ln nt+1 + A ln et+1 , where A ∈ (0, 1), lt is leisure at time t, ct+1 is consumption attime t+1, nt+1 is fertility rate at time t+1, and et+1 is the quality of schools at time t+1. Due to this quasi-linear utility function, a higher income level leads people to have fewer children, as shown below. As mentioned in Kremer and Chen (1999, 2000), this function is a convenient vehicle by which to consider the inﬂuence of the negative correlations between the income level and fertilityand between the quality of schools and fertility. If a log-linear utility function is assumed, the fertility rate becomes constant. However, this is not consistent with the actual data, that is, the negative correlation between income and fertility. 3
Because of the importance of this issue, there are many related studies (Barro and Becker 1989; Becker and Barro 1986, 1988; Becker et al. 1990;...