Household and economic growth in Latin America and the Caribbean

Household and economic growth in Latin America and the Caribbean

Published Jan 2000

Authors

J.R. Behrman, D Suzanne, S Miguel

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Education, population and the economy: factors impacting growth in Latin America

What is the relationship between households and economic growth in Latin America. This question is considered by providing a framework for investigation and by exploring the factors explaining growth from the perspective of microeconomic agents. The paper highlights the factors that shape these decisions at the micro level, focusing primarily on two kinds of household decisions that are crucial to economic growth: fertility and investment in education.

The relevance of education and fertility decisions as inputs for economic growth in Latin America is discussed and some examples of their importance are provided. The paper then explores what determines the fertility and schooling investment behavior of households from a macroeconomic and microeconomic perspective. Some data problems for improving understanding of the determinants of education and fertility decision in the region are then highlighted.

The paper finds that:

  • while the connections between schooling investments and growth are well established in the economics literature, the link with fertility choices is not that obvious
  • fertility affects economic growth because these decisions determine the size of the human resources available to the economy, and most importantly because they are the major determinants of changes in the age structure that become apparent long after fertility decisions were made
  • Latin America is at the verge of entering a period of a demographic opportunity due to sharp increases in the proportion of population that is of working age during the next two decades
  • in terms of schooling, the main microeconomic factors that shape household decisions appear to be the functioning of financial markets, the restrictions imposed by household resources, and in some cases the lack or low quality of public schooling services
  • there is evidence that macroeconomic instability has had a strong negative effect over the rate of schooling progress in the LAC region, most of the slowdown in schooling progress for the generations of school age during the 1980s decade can be attributed to the adverse macro environment
  • with regards to fertility, most of the evidence at the micro level points to the inverse relation between schooling and fertility
  • fertility choices are the outcome of a complex decision-making process that also depends on the economic environment, better market opportunities for women can have strong effects on fertility decisions at the micro level, these in turn influence future growth prospects through their impact on the age structure of the population in subsequent years

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