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Economics Seminar

Author:

• Joel Guttman
  Bar Ilan University

This paper argues that, in the presence of a subsistence constraint, the increase and subsequent decrease in fertility rates worldwide can be explained by the increase in non-wage income above the minimum required for subsistence. When non-wage income (e.g., deriving from land rents) is below the subsistence constraint (the Malthusian period), increases in wages lead to higher fertility rates, while if non-wage income is above the subsistence constraint (the post-Malthusian period), the effect of wage rate on fertility is negative. In the model, there are two types of individuals: high-ability and low-ability. Wages increase over time because of (exogenous) technological change. In the Malthusian period, high-ability individuals have higher fertility rates than low-ability individuals owing to the higher wages received by the high-ability types, and thus there is positive natural selection (the average "quality" of the workforce increases). In the post-Malthusian period, the opposite occurs: low-ability individuals have higher fertility rates than high-ability individuals. This curiously leads to "adverse natural selection" — a phenomenon that seems to have been overlooked by previous theorists, though noted in passing by Galor and Moav (QJE, 2002). The model predicts that the timing of the demographic transition depends on how land rents are distributed in the population, and the demographic transition may have been triggered in some European countries by the introduction of welfare payments, e.g., by the Poor Laws in England.