The fertility transition and directed technical change towards green growth

It is generally believed that population growth is associated with higher CO₂ emissions. Empirically, however, the fertility rate is negatively associated with CO₂ emissions while education and individual human capital are positively associated. In this paper, we set up an R&D-based model of economic growth and pollution with endogenous fertility and education that explains these stylized facts and reconciles them with the common wisdom. By refining the theory of directed technical change we explain why (i) lower birth rates within and across countries are associated with more human capital and therefore with higher income and more CO₂ emissions in the 19th and 20th century and (ii) that directed technical change is a necessary but not sufficient condition for low fertility to ultimately have a positive impact on emissions, as a smaller but better educated workforce is able to transition to green growth earlier.