We develop a model of fertility choice by utility maximizing households, based on an explicit notion of intergenerational external effects. In contrast to previous economic literature, we assume that the external effects run from children to parents. This gives rise to a fundamentally different reason for bearing of children, as parents expect to be cared for, at least partially, by their children in their old age. We take the behavior of infant mortality since 1541 as the key exogenous variable and endogeneize the size of the transfer from children to parents by linking it to the endogenous savings and fertility choice of the parents. This generates a dynamic model of a Malthusian society that performs substantially better, qualitatively and quantitatively, than previous economic models of endogenous fertility.
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1Both authors are grateful to the National Science Foundation for financial support, to M ichael Bar, Carol M ontealegre, Adrian Peralta-Alva, and M ichele Tertilt for research assistance and to Jeremy Greenwood, Per Krussell, an anonymous referee, and the participants at the CV Starr workshop on Economics of the Family for their comments and suggestions; Boldrin also acknowledges research support from the Fundación BBVA and the University of M innesota Grant-in-Aid program.