California Center for Population Research

Every industrialized country once underwent a transition from Malthusian stag-nation to growth, accompanied by a demographic transition from high to low fertility. Even though the overall pattern is repeated, there are large cross-country variations in the timing and speed of the fertility decline that accompanies the transition. This paper explores whether differences in policies that affect the opportunity cost of edu-cation, namely child-labor restrictions and education subsidies, can account for these differences. A model is developed which delivers an endogenous transition from Malthusian stagnation to growth. A calibrated version of the model shows that ed-ucational policies have large effects on the fertility transition. While the effects of education subsidies are minor, accounting for child-labor regulations is crucial. The same policies that affect fertility decline also have large effects on the evolution of the income distribution in the course of development.