A Neoclassical Theory of Population and Growth
Professor Juan Carlos Cordoba
Professor of Economics
Iowa State University
The question of optimal population size on a finite planet is at the forefront of current policy issues. The purpose of this paper is to use economic theory to understand the dynamics of population in the context of fixed resources. We merge the Barro and Becker (1989) dynastic model of endogenous fertility choice with a neoclassical production structure augmented to include fixed resources, land in particular. Fertility decisions are driven by the trade-off between dynastic altruism on children and the cost of having children. The presence of a fixed resource allows the model to have a well-defined steady-state population level. We use the model to explore the conditions and understand the mechanisms under which the population implodes, explodes, or stabilizes. We show that per capita consumption and output do not respond to land-augmenting technological progress but they do increase with technology advances in labor or physical capital. We resolve Lucas’ (2002) paradox.