Habit Formation, Dynastic Altruism, and Population Dynamics

Andreas Schaefer, Simone Valente

Research output: Contribution to journalArticle

4 Citations (Scopus)
96 Downloads (Pure)

Abstract

We study the general equilibrium properties of two growth models with overlapping generations, habit formation, and endogenous fertility. In the neoclassical model, habits modify the economy’s growth rate and generate transitional dynamics in fertility; stationary income per capita is associated with either increasing or decreasing population and output, depending on the strength of habits. In the AK specification, growing population and increasing consumption per capita require that the habit coefficient lie within definite boundaries; outside the critical interval, positive growth is associated with either declining consumption due to overcrowding, or extinction paths with declining
population. In both frameworks, habits reduce fertility: the trade-off between
second-period consumption and spending for bequests prompts agents to decrease fertility in order to make parental altruism less costly. This mechanism suggests that status-dependent preferences may explain part of the decline in fertility rates observed in most developed economies.
Original languageEnglish
Pages (from-to)365-397
JournalMacroeconomic Dynamics
Volume15
Issue number3
DOIs
Publication statusPublished - Jun 2011

Fingerprint

Habit formation
Population dynamics
Altruism
Habit
Fertility
Overlapping generations
Transitional dynamics
Endogenous fertility
Fertility rate
Bequests
General equilibrium
Make-to-order
Trade-offs
Extinction
Growth model
Overcrowding
Neoclassical model
Per capita income
Coefficients

Cite this

Habit Formation, Dynastic Altruism, and Population Dynamics. / Schaefer, Andreas; Valente, Simone.

In: Macroeconomic Dynamics, Vol. 15, No. 3, 06.2011, p. 365-397.

Research output: Contribution to journalArticle

@article{cbb842a5aef94a8cb281dc489cf3d579,
title = "Habit Formation, Dynastic Altruism, and Population Dynamics",
abstract = "We study the general equilibrium properties of two growth models with overlapping generations, habit formation, and endogenous fertility. In the neoclassical model, habits modify the economy’s growth rate and generate transitional dynamics in fertility; stationary income per capita is associated with either increasing or decreasing population and output, depending on the strength of habits. In the AK specification, growing population and increasing consumption per capita require that the habit coefficient lie within definite boundaries; outside the critical interval, positive growth is associated with either declining consumption due to overcrowding, or extinction paths with decliningpopulation. In both frameworks, habits reduce fertility: the trade-off betweensecond-period consumption and spending for bequests prompts agents to decrease fertility in order to make parental altruism less costly. This mechanism suggests that status-dependent preferences may explain part of the decline in fertility rates observed in most developed economies.",
author = "Andreas Schaefer and Simone Valente",
year = "2011",
month = "6",
doi = "10.1017/S136510051000009X",
language = "English",
volume = "15",
pages = "365--397",
journal = "Macroeconomic Dynamics",
issn = "1365-1005",
publisher = "Cambridge University Press",
number = "3",

}

TY - JOUR

T1 - Habit Formation, Dynastic Altruism, and Population Dynamics

AU - Schaefer, Andreas

AU - Valente, Simone

PY - 2011/6

Y1 - 2011/6

N2 - We study the general equilibrium properties of two growth models with overlapping generations, habit formation, and endogenous fertility. In the neoclassical model, habits modify the economy’s growth rate and generate transitional dynamics in fertility; stationary income per capita is associated with either increasing or decreasing population and output, depending on the strength of habits. In the AK specification, growing population and increasing consumption per capita require that the habit coefficient lie within definite boundaries; outside the critical interval, positive growth is associated with either declining consumption due to overcrowding, or extinction paths with decliningpopulation. In both frameworks, habits reduce fertility: the trade-off betweensecond-period consumption and spending for bequests prompts agents to decrease fertility in order to make parental altruism less costly. This mechanism suggests that status-dependent preferences may explain part of the decline in fertility rates observed in most developed economies.

AB - We study the general equilibrium properties of two growth models with overlapping generations, habit formation, and endogenous fertility. In the neoclassical model, habits modify the economy’s growth rate and generate transitional dynamics in fertility; stationary income per capita is associated with either increasing or decreasing population and output, depending on the strength of habits. In the AK specification, growing population and increasing consumption per capita require that the habit coefficient lie within definite boundaries; outside the critical interval, positive growth is associated with either declining consumption due to overcrowding, or extinction paths with decliningpopulation. In both frameworks, habits reduce fertility: the trade-off betweensecond-period consumption and spending for bequests prompts agents to decrease fertility in order to make parental altruism less costly. This mechanism suggests that status-dependent preferences may explain part of the decline in fertility rates observed in most developed economies.

UR - https://doi.org/https://doi.org/10.1017/S136510051000009X

U2 - 10.1017/S136510051000009X

DO - 10.1017/S136510051000009X

M3 - Article

VL - 15

SP - 365

EP - 397

JO - Macroeconomic Dynamics

JF - Macroeconomic Dynamics

SN - 1365-1005

IS - 3

ER -