Habit Formation, Dynastic Altruism, and Population Dynamics

We study the general equilibrium properties of two growth models with overlapping generations, habit formation and endogenous fertility. In the neoclassical model, habits modify the economys growth rate and generate transitional dynamics in fertility; station-ary income per capita is associated with either increasing or decreasing population and output, depending on the strength of habits. In the AK speci\u85cation, growing population and increasing consumption per capita require that the habit coe ¢ cient lie within de\u85nite boundaries; outside the critical interval, positive growth is associated with either declining consumption due to overcrowding, or extinction paths with declining population. In both frameworks, habits reduce fertility: the trade-o ¤ between second-period consumption and spending for bequests prompts agents to decrease fertility in order to make parental altru-ism less costly. This mechanism suggests that status-dependent preferences may explain part of the decline in fertility rates observed in most developed economies