The Path to Prosperity: A Political Model of Demographic Change

This paper presents a formal model that characterizes the political mechanisms of demographic change, establishing a critical link in economic development. We demonstrate that fertility decisions are determined by three fundamental political variables: political stability, political capacity and political freedom. Modeling strategic multi-objective policy setting by the government, we derive a set of equilibrium conditions that enable poor nations to escape a poverty trap and to successfully develop. Empirical tests for a sample of 100 countries from 1960 to 1990 provide strong support for the propositions of the formal model. In particular, we show that political stability, political capacity and political freedom all lead to reductions in birth rates. We conclude that politics can be either a stimulant or barrier to economic development.