Fertility and Social Interaction: An Economic Perspective

By Hans-Peter Kohler | Go to book overview

5 Fertility Decline as a Coordination Problem

5.1 Introduction

Fertility models that exhibit multiple equilibria are commonly used to explain the rapid and sustained decline of fertility during the demographic transition and the unclear relation between socio-economic determinants and the onset of a fertility decline (e.g., Chapter 4 ; Becker et al. 1990 ; Lee 1986). In these models, a population may be entrenched in a low-development, high-fertility situation despite the existence of a Pareto-superior equilibrium with higher levels of income and lower fertility. The selection between the high and low fertility equilibrium is therefore a central aspect in these approaches. Usually these models emphasize the role of initial conditions, exogenous shocks and large temporary family program efforts for the selection of populations into the high or low fertility equilibrium. For instance, Becker et al. (1990) observe that 'considerable luck is needed in the timing and magnitude of shocks to give a sufficiently big push in investments in human and physical capital' (p. 33), and the development of the currently industrialized countries in their view has been due to such historical 'luck'. Although Becker et al. contend that even very unlikely configurations of events occur in thousands of years of history, this conclusion is not comforting for observers of contemporary fertility transitions. Several other studies have therefore developed models, in which the economy endogenously evolves from a high to a low fertility regime (e.g., Galor and Weil 1996 , 2000). A frequent mechanism leading to the onset of a demographic transition in these analyses is technological progress and economic growth, which lead to an incentive structure that favors increased investments in the human capital (or 'quality') of children and a reduced fertility level. 1

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