Fertility, Heterogeneity and the Golden Rule

Arbeitspapier

Phelps's (1961) Golden Rule states an unambiguous relationship be- tween optimal capital intensity and fertility: a rise in fertility decreases the optimal capital intensity, because a higher fertility increases the in- vestment required to sustain a given capital to labour ratio (i.e., the cap- ital dilution effect). Using a matrix population model embedded in a two-period OLG setting, we examine the robustness of that relationship to the partitioning of the population into 2 subpopulations having dis- tinct fertility behaviors. We derive the optimal accumulation rule in that framework, and we show that, unlike what prevails under a homogeneous population, a rise in fertility does not necessarily reduce the Golden Rule capital intensity, but increases it when the composition effect induced by the fertility change outweighs the standard capital dilution effect pre- vailing under a fixed partition of the population. We also explore the robustness of these results to a finer description of heterogeneity, that is, a partitioning of the population into a larger number of subpopulations.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: GLO Discussion Paper ; No. 1165

Classification and Topics

• Classification: Wirtschaft ; General Aggregative Models: Neoclassical ; Macroeconomics: Consumption; Saving; Wealth ; Investment; Capital; Intangible Capital; Capacity ; Fertility; Family Planning; Child Care; Children; Youth
• Subject: Golden Rule ; capital accumulation ; fertility ; OLG models ; matrix population models ; heterogeneity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ponthiere, Gregory
• Event: Veröffentlichung
• (who): Global Labor Organization (GLO)
• (where): Essen
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/264295
• Last update: 10.03.2025, 11:42 AM CET