The Effects of Credit Markets on Fertility in Closed and Open Economies

This paper studies the effects of credit markets on fertility rates of poor and rich agents, using a two-period, overlapping-generation (OLG) model. Poor and rich parents choose fertility and consumption to maximize utility, which depends only on their own number of children and consumption. Initially agents are restricted from borrowing and lending. Subsequently, open and closed economies are studied where agents have access to credit markets. Results show that without credit markets, rich agents have more children than poor agents, and that with credit markets, poor agents conceive more children than rich agents only if their second period income to first period income is sufficiently larger than that of rich agents