A simulation model of the effect of fertility reduction on economic growth

Mahesh Karra, Harvard University
David Canning, Harvard University
Joshua Wilde, University of South Florida

We investigate the effects of a decline in fertility, due to an increase in access to contraception, on economic outcomes using a macro-simulation model. We incorporate three fertility effects that have previously not been included in such a model: 1) the effect of the timing and spacing of fertility on child and maternal health; 2) the effect of fertility and age structure on savings; and 3) a feedback that is induced from increases in girl’s education to later fertility. We also improve the model of the economy by incorporating a more realistic two-sector framework by allowing for labor market imperfections. Using data from Nigeria, we find that adding these channels more than doubles the effect of a fertility decline on income per capita after 20 years and almost triples the effect after 50 years when compared to simulation results from Ashraf, Weil, & Wilde (2013).