Academic journal article Journal of Economic Development

Family Size, Human Capital and Growth: Structural Path Analysis of Rwanda

Academic journal article Journal of Economic Development

Family Size, Human Capital and Growth: Structural Path Analysis of Rwanda

Article excerpt

This paper analyzes the macroeconomic role that different household groups play in human capital formation, sectoral growth and income distribution in Rwanda. Using a disaggregated SAM for Rwanda and, with the assistance of structural path analysis, the paper explores the macroeconomic implications of family size for human capital, sectoral growth and income distribution. The findings support the so-called quantity-quality trade-off hypothesis: the smaller the family size, the higher the investment in human capital. In particular, the human capital investment of households with 1-3 children tends to be more pronounced than that of households with more than 3 children. Moreover, households with 1-3 children act as an important intermediate pole transmitting the influence of human capital investment on agricultural production. As a result, promoting family planning programs seems to be a viable strategy for economic growth and poverty reduction.

Keywords: Fertility, Family Planning, Human Capital, Growth, Income Distribution, Path Analysis, SAM Multipliers, Rwanda

JEL classification: I15, I25, I38, J13, O15, O21

(ProQuest: ... denotes formulae omitted.)

1. BACKGROUND AND INTRODUCTION

The role of human capital in economic growth and development has been well examined in the literature.1 The debates about the relationship between human capital and economic development evolve around two main assertions (Rosenzweig, 1988; Bloom, Canning and Sevilla, 2001). First, large families directly contribute to lowering human capital; for given resources, high fertility impedes human capital formation. Therefore, public organizations should give high priority in their agendas to the dissemination of information about negative consequences of high fertility and provide the means for fertility control. Second, human capital investment reflects the economic circumstances of a country; the observed mix of large families and low levels of education, health, and nutrition are symptoms, not causes, of a lack of economic development. Governments and international development agencies should therefore focus on removing impediments to economic development and not on families' decisions about their family size. These assertions suggest that fertility and poverty are interlinked through investment in human capital not only at the household but also at the national level. Considerable evidence from the development literature proves that lowering fertility -in part through family planning programs- is essential to reduce population growth, increase per capita income through investment in human capital and hence reduce poverty through good policies.

The Rwandan government has formally acknowledged the link between fertility and poverty (MINECOFIN, 2007) and embarked on various large-scale, donor-funded family planning programs (Solo, 2008).2 The contribution of these programs and supportive policies to the smooth transition to stability and development cannot be overlooked. Demographic programs during the period of 1995-2006 have led to an average fertility rate about five, while economic policy has led to an average GDP growth of 7.3% per year. The sectoral contribution to this high economic growth during the period concerned has been researched by a large number of studies in the literature (for example, Diao, Fan, Kanyarukiga and Yu, 2010); however, the extent to which different household groups transmit the economic influence of an exogenous income injection onto the economy-wide human capital formation, growth and income distribution remains largely unexplored. This paper takes the task to investigate the role of family size in the transmission of economic influences during the period 1995-2006. In order to analyze the linkages between family size and human capital formation, the only available Social Accounting Matrix 2006 (SAM) of Rwanda has been adjusted to effectively address the objective of this paper. The first adjustment is the disaggregation of household account into four groups: Group 1 includes those households without children (H0); Group 2, with one-three children (H13); Group 3, with four-five children (H45) ; and Group 4, with more than five children (H6). …

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