A Theory of Demographic Transition and Fertility Rebound in the Process of Economic Development

Recent evidence of increasing fertility rates in developed countries, offers support to the idea that, from the onset of early industrialisation to the present day, the dynamics of fertility can be represented by an N-shaped curve. An OLG model with parental investment in human capital can account for these observed movements in fertility rates during the different phases of demographic change. A demographic transition with declining fertility emerges at the intermediate phase, when parents engage on a child quantity-quality tradeoff. At later stages however, the continuing process of economic growth generates sufficient resources so that households can rear more children while still providing the desirable amount of educational investment per child.