Sunday, October 17, 2010

Causes of the Demographic Transition

Oded Galor has made many contributions to growth theory and population economics and the connections between them. A new working paper examines various economic theories of the causes behind the demographic transition. In Galor's terminology the demographic transition refers specifically to the decline in fertility rates and population growth. This is the third phase in the conventional demographic transition model:

Galor gives the background of each theory, facts that they predict, and whether those facts match reality. It is a very useful survey. Hypotheses/theories that he rejects based on the evidence are that the fall in fertility was caused by:

1. Rising income in the early industrial revolution - a theory he associates with Gary Becker.

2. The decline in infant and child mortality.

3. Development of capital markets reduced the need to have children to support oneself in old age - The old age security hypothesis.

The ones for which he finds support are (not surprisingly given his previous work on these topics):

1. The rise in demand for human capital resulting in a trade-off between child quantity and child "quality".

2. The decline in the gender gap in human capital and wages.

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