A Competitive Growth Model with Endogenous Fertility

Abstract

This paper investigates the interaction between endogenous fertility behavior and the distribution of income and wealth among families in a competitive market economy. We construct a growth model in which altruistic dynasties are heterogeneous in their initial stocks of physical capital. Dynasties make choices of family size along with decisions about consumption and intergenerational transfers. We show that, if the degree of altruism per child is decreasing in the number of children and if preferences over the number of children satisfy a normality assumption, all steady states are characterized by equality of capital stocks and consumption among families. We also show that specific functional forms for the utility function used in the fertility literature, including Becker and Barro (1988), Barro and Becker (1989), Benhabib and Nishimura (1993) and Lucas (2002), are special cases of the preference specification used in this paper. Hence, they also generate egalitarian steady states.