Schooling, Skill Demand and Differential Fertility in the Process of Structural Transformation

T. Terry Cheung

IEAS Working Paper No. 22-A006, December 2022

Demography and structural transformation are interrelated, and depend critically on education. At the turn of the twentieth century, U.S. parents began having fewer children while increasing educational investment per child. This quantity-quality tradeoff facilitated job reallocation from the low-skilled agricultural sector to the high-skilled nonagricultural sector. This transformation is examined in a heterogeneous agent model with a non-degenerate human capital distribution, focusing on how fertility and education decisions aff ect structural transformation. The result shows that the quantity-quality decisions account for up to approximately one-third of the decline in the agricultural employment share.