A population-macroeconomic growth model for currently developing countries

This paper constructs a theoretical model that predicts, as observed in some currently developing countries, that the average school enrollment ratio may fall even when the average fertility rate declines. Unlike existing models, the current analysis indicates that economic growth may slow down when a fertility transition starts. Asymmetric behavior with respect to fertility and education between households stemming from income inequality plays an important role in generating this result. We examine the implications of an education subsidy policy. Contrary to intuition, in some circumstances this policy may decrease the average school enrollment ratio and future economic growth.