Differential Fertility, Intergenerational Mobility and the Process of Economic Development

This paper analyzes the effects of population dynamics with differential fertility between the educated and the uneducated on intergenerational mobility, income inequality and economic development in an overlapping generations framework. Population dynamics has two effects on the economy: the direct effect on the educated share through changing in population size of the economy as whole, and the indirect effect on the educated share through decreasing/increasing transfer per child. When population growth increases sufficiently, the mobility and income inequality exhibit cyclical behavior due to rapidly decreasing transfer per child and population size. In contrast, when population growth decreases sufficiently, the mobility and income inequality monotonically approach steady state and the economy has low steady state with high population growth and income inequality, and high steady state with low population growth and income inequality. As a result, population dynamics with economic development plays crucial role in the transitional dynamics of mobility.