Economic Growth With Locked-In Fertility: Under- and Over-Investment in Education

This research theoretically analyzes the role of irreversible fertility decisions in economic growth in the presence of idiosyncratic ability shocks after childbirth. It argues that the irreversibility constraint delays the growth process by distorting the resource allocation between the quantity and quality of children. In underdeveloped stages, where family size is locked into large levels, education investment places a heavy financial burden on households. The impossibility of ex post fertility adjustment then deprives some competent children of learning opportunities. In more developed stages, by contrast, family size locked into smaller levels facilitates education investment even in some incompetent children. A redistributive policy to enhance aggregate human capital and the growth performance is proposed for each stage.