Urbanization, Old-Age Security, Saving and Fertility in Developing Economies

This paper develops a two-sector overlapping generations (OLG) model of the co-evolution of urbanization, saving, and fertility in developing economies. Children are viewed as a means of old-age support, particularly in the rural sector, as well as a good valued for its own sake. It is shown that, under plausible parameter assumptions, a very mild rate of technological change is sufficient to yield large increases in the saving rate and in the level of urbanization, and large decreases in the fertility rate over time, which accords well with the experience of the Asian Tigers.