Research

During the first half of the twentieth century, many US states enacted laws restricting women's labor market opportunities, including maximum hours restrictions, minimum wage laws, and night-shift bans. The era of so-called protective labor laws came to an end in the 1960s as a result of civil rights reforms. In this paper, we investigate the political economy behind the rise and fall of these laws. We argue that the main driver behind protective labor laws was men's desire to shield themselves from labor market competition. We spell out the mechanism through a politico-economic model in which singles and couples work in different sectors and vote on protective legislation. Restrictions are supported by single men and couples with male sole earners who compete with women for jobs. We show that the theory's predictions for when protective legislation will be introduced are well supported by US state-level evidence.

This chapter argues that parenting choices are a central force in the joint evolution of culture and economic outcomes. We present a framework in which parents-motivated by both their children's future success and their own normative beliefs-choose parenting styles and transmit cultural traits responding to economic incentives. Values such as work ethic, patience, and religiosity are more likely to be instilled when their anticipated returns, economic or otherwise, are high. The interaction between parenting and economic conditions gives rise to endogenous cultural and economic stratification. We extend the model to include residential sorting and social interactions, showing how neighborhood choice reinforces disparities in trust and human capital. Empirical evidence from the World Values Survey supports the model's key predictions. We conclude by highlighting open questions at the intersection of parenting, culture, and inequality.

The Covid-19 pandemic has led to prolonged school closures in most countries around the world. In this paper, we aim to quantify the potential impact of pandemic learning losses in developing countries, with a specific focus on sub-Saharan Africa. We argue that there are both micro and macro channels that imply that the repercussions of pandemic education disruptions are more severe in poorer compared to richer economies. First, the evidence suggests that children in poor countries suffer larger learning losses. This obtains in part because of a lower availability and efficiency of alternative learning channels such as virtual instruction, and in part because of a higher impact on dropout rates, which are amplified by income losses during the pandemic. Second, a given learning loss has a larger medium-run impact on the economy, because recent school graduates make up a larger fraction of the total labor force in low-income economies, and because older cohorts have relatively little formal education. We quantify these channels using a model of macro-development that is matched to household-level and aggregate data from Nigeria.

In recent US recessions, employment losses have been much larger for men than for women. Yet, in the economic downturn caused by the Covid-19 pandemic the opposite is true: women's employment declined much more than men's. Why does a pandemic recession have a disproportionate impact on women's employment, and what are the wider repercussions of this phenomenon? We argue that more women lost jobs because their employment is concentrated in contact-intensive sectors such as restaurants and because increased childcare needs during school and daycare closures prevented many from working. We analyze the macroeconomic implications of women's employment losses using a model that features heterogeneity in gender, marital status, childcare needs, and human capital. A pandemic recession is qualitatively different from a regular recession because women's labor supply behaves differently than men's. Specifically, our quantitative analysis shows that a pandemic recession features a stronger transmission from employment to aggregate demand and results in a persistent widening of the gender wage gap. Many of the negative repercussions of a pandemic recession can be averted by prioritizing opening schools and daycare centers during the recovery.

In recent decades, the correlation between U.S. men's wages and hours worked has reversed: low-wage men used to work the longest hours, whereas today it is men with the highest wages who work the most. This changing correlation accounts for roughly 30 percent of the rise in the variance of male earnings between 1975 and 2015. In this paper, we rationalize these trends in a model of joint household labor supply. Our quantitative model generates similar changes to what is observed in the data as a reaction to shifts in women's education and labor supply, the gender gap, and assortative mating. Our model is consistent with the observations that the changing wage-hours correlation among men is driven by married men, and that there is little change in the wage-hours correlation among employed women and at the household level. The results suggest that taking into account joint household decision making is essential for understanding the dynamics of labor supply.

This paper quantitatively assesses distributional effects of monetary policy. We use a life cycle model with housing to compute the response of the U.S. household sector to an increase in the Federal Reserve's inflation target. We find than an increase in nominal interest rates generated by higher expected inflation has sizeable and heterogeneous welfare effects. Moreover, the responses of winners and losers do not cancel out; instead the policy announcement has persistent effects on aggregate consumption and house prices that propagate through the distribution of wealth.

As children reach adolescence, peer interactions become increasingly central to their development, whereas the direct influence of parents wanes. Nevertheless, parents can continue to exert leverage by shaping their children's peer groups. We study interactions of parenting style and peer effects in a model where children's skill accumulation depends on both parental inputs and peers, and where parents can affect the peer group by restricting who their children can interact with. We estimate the model and show that it can capture empirical patterns regarding the interaction of peer characteristics, parental behavior, and skill accumulation among US high school students. We use the estimated model for policy simulations. We find that interventions that move children to a more favorable neighborhood have large effects but lose impact when they are scaled up because parents' equilibrium responses push against successful integration with the new peer group. We suggest complementary policies that can sustain the effect of scaled-up policies.

Why has the college wage premium risen rapidly in the United States since the 1980s, but not in European economies such as Germany? We argue that differences in employment protection can account for much of the gap. We develop a model in which firms and workers make relationship-specific investments in skill accumulation. The incentive to invest is stronger when employment protection creates an expectation of long-lasting matches. We argue that changes in the economic environment have reduced relationship-specific investment for less-educated workers in the United States, but not for better-protected workers in Germany.

In this survey, we argue that the economic analysis of fertility has entered a new era. First-generation models of fertility choice were designed to account for two empirical regularities that, in the past, held both across countries and across families in a given country: a negative relationship between income and fertility, and another negative relationship between women's labor force participation and fertility. The economics of fertility has entered a new era because these stylized facts no longer universally hold. In high-income countries, the income-fertility relationship has flattened and in some cases reversed, and the cross-country relationship between women's labor force participation and fertility is now positive. We summarize these new facts and describe new models that are designed to address them. The common theme of these new theories is that they view factors that determine the compatibility of women's career and family goals as key drivers of fertility. We highlight four factors that facilitate combining a career with a family: family policy, cooperative fathers, favorable social norms, and flexible labor markets. We also review other recent developments in the literature, and we point out promising new directions for future research on the economics of fertility.

This chapter provides new evidence on educational inequality and reviews the literature on the causes and consequences of unequal education. We document large achievement gaps between children from different socio-economic backgrounds, show how patterns of educational inequality vary across countries, time, and generations, and establish a link between educational inequality and social mobility. We interpret this evidence from the perspective of economic models of skill acquisition and investment in human capital. The models account for different channels underlying unequal education and highlight how endogenous responses in parents' and children's educational investments generate a close link between economic inequality and educational inequality. Given concerns over the extended school closures during the Covid-19 pandemic, we also summarize early evidence on the impact of the pandemic on children's education and on possible long-run repercussions for educational inequality.

Two centuries ago, in most countries around the world, women were unable to vote, had no say over their own children or property, and could not obtain a divorce. Women have gradually gained rights in many areas of life, and this legal expansion has been closely intertwined with economic development. We aim to understand the drivers behind these reforms. To this end, we distinguish between four types of women's rights---economic, political, labor, and body---and document their evolution over the past 50 years across countries. We summarize the political-economy mechanisms that link economic development to changes in women's rights and show empirically that these mechanisms account for a large share of the variation in women's rights across countries and over time.

In many high-income economies, the recession caused by the Covid-19 pandemic has resulted in unprecedented declines in women's employment. We examine how the forces that underlie this observation play out in developing countries, with a specific focus on Nigeria, the most populous country in Africa. A force affecting high- and low-income countries alike are increased childcare needs during school closures; in Nigeria, mothers of school-age children experience the largest declines in employment during the pandemic, just as in high-income countries. A key difference is the role of the sectoral distribution of employment: whereas in high-income economies reduced employment in contact-intensive services had a large impact on women, this sector plays a minor role in low-income countries. Another difference is that women's employment rebounded much more quickly in low-income countries. We conjecture that large income losses without offsetting government transfers drive up labor supply in low-income countries during the recovery.

We examine the impact of the global recession triggered by the Covid-19 pandemic on women's versus men's employment. Whereas recent recessions in advanced economies had a disproportionate impact on men's employment, giving rise to the moniker "mancessions," we show that the pandemic recession of 2020 was a "shecession" with larger employment declines among women in most countries. We examine the causes behind this pattern using micro data from several national labor force surveys, and show that both the composition of women's employment across industries and occupations as well as increased childcare needs during closures of schools and daycare centers made important contributions. Gender gaps in the employment impact of the pandemic arise almost entirely among workers who are unable to work from home. Among telecommuters a different kind of gender gap arises: women working from home during the pandemic spent more work time also doing childcare and experienced greater productivity reductions than men. We identify two key challenges for future research. First, why is the pandemic gender gap pervasive, i.e., why did women experience larger employment reductions than men even after accounting for industry/occupation and childcare effects? Second, how will the pandemic shape gender equality in a post-pandemic labor market that will likely continue to be characterized by pervasive telecommuting?

What are the effects of school closures during the Covid-19 pandemic on children's education? Online education is an imperfect substitute for in-person learning, particularly for children from low-income families. Peer effects also change: schools allow children from different socio-economic backgrounds to mix together, and this effect is lost when schools are closed. Another factor is the response of parents, some of whom compensate for the changed environment through their own efforts, while others are unable to do so. We examine the interaction of these factors with the aid of a structural model of skill formation. We find that school closures have a large, persistent, and unequal effect on human capital accumulation. High school students from low-income neighborhoods suffer a learning loss of 0.4 standard deviations after a one-year school closure, whereas children from high-income neighborhoods initially remain unscathed. The channels operating through schools, peers, and parents all contribute to growing educational inequality during the pandemic.

A long-standing challenge for welfare economics is to develop welfare criteria that can be applied to allocations with different population levels. Such a criterion is essential to resolve the optimal population problem, i.e., the tradeoff between population size and the welfare of each person alive. A welfare criterion that speaks to this issue inherently requires evaluating the welfare of nonexistent people, because some people exist only in some allocations but not in others. To make progress, we consider the population problem in an environment where population is variable, but there is a fixed supply of souls, who may experience multiple incarnations over time. Rather than pondering the value of nonexistence, from the souls' perspective comparing larger or smaller populations merely involves valuing shorter or longer waits until the next incarnation. We argue that such comparisons are possible on the basis of introspection and lead to intuitive welfare criteria with attractive properties. We emphasize that one does not have to believe in reincarnation to accept the resulting criteria; rather, reincarnation serves as a metaphor to facilitate the necessary utility comparisons.

The economic downturn caused by the current COVID-19 outbreak has substantial implications for gender equality, both during the downturn and the subsequent recovery. Compared to "regular" recessions, which affect men's employment more severely than women's employment, the employment drop related to social distancing measures has a large impact on sectors with high female employment shares. In addition, closures of schools and daycare centers have massively increased child care needs, which has a particularly large impact on working mothers. The effects of the crisis on working mothers are likely to be persistent, due to high returns to experience in the labor market. Beyond the immediate crisis, there are opposing forces which may ultimately promote gender equality in the labor market. First, businesses are rapidly adopting flexible work arrangements, which are likely to persist. Second, there are also many fathers who now have to take primary responsibility for child care, which may erode social norms that currently lead to a lopsided distribution of the division of labor in house work and child care.

Empirical evidence suggests that money in the hands of mothers (as opposed to fathers) increases expenditures on children. Does this imply that targeting transfers to women promotes economic development? Not necessarily. We consider a noncooperative model of the household where a gender wage gap leads to endogenous household specialization. As a result, women indeed spend more on children and invest more in human capital. Yet, depending on the nature of the production function, targeting transfers to women may be beneficial or harmful to growth. Transfers to women are more likely to be beneficial when human capital, rather than physical capital or land, is the most important factor of production. We provide empirical evidence supportive of our mechanism: In Mexican PROGRESA data, transfers to women lead to an increase in spending on children, but a decline in the savings rate.

It takes a woman and a man to make a baby. This fact suggests that for a birth to take place, the parents should first agree on wanting a child. Using newly available data on fertility preferences and outcomes, we show that indeed, babies are likely to arrive only if both parents desire one. In addition, there are many couples who disagree on having babies, and in low-fertility countries women are much more likely than men to be opposed to having another child. We account for this evidence with a quantitative model of household bargaining in which the distribution of the burden of child care between mothers and fathers is a key determinant of fertility. The model implies that fertility is highly responsive to targeted policies that lower the child care burden specifically for mothers.

Parenting decisions are among the most consequential choices people make throughout their lives. Starting with the work of pioneers such as Gary Becker, economists have used the toolset of their discipline to understand what parents do and how parents' actions affect their children. In recent years, the literature on parenting within economics has increasingly leveraged findings and concepts from related disciplines that also deal with parent-child interactions. For example, economists have developed models to understand the choice between various parenting styles that were first explored in the developmental psychology literature, and have estimated detailed empirical models of children's accumulation of cognitive and noncognitive skills in response to parental and other inputs. In this paper, we survey the economic literature on parenting and point out promising directions for future research.

We document evidence on preferences for childbearing in developing countries. Across countries, men usually desire larger families than women do. Within countries, we find wide dispersion in spouses' desired fertility: there are many couples whose ideal family size differs by five children or more. This disagreement between spouses suggests that the extent to which women are empowered should matter for fertility choices. We point to evidence at both the macro and micro levels that this is indeed the case. We conclude that taking account of household bargaining and women's empowerment in analyses of fertility is an important challenge for research.

In the centuries leading up to the Industrial Revolution, Western Europe gradually pulled ahead of other world regions in terms of technological creativity, population growth, and income per capita. We argue that superior institutions for the creation and dissemination of productive knowledge help explain the European advantage. We build a model of technological progress in a pre-industrial economy that emphasizes the person-to-person transmission of tacit knowledge. The young learn as apprentices from the old. Institutions such as the family, the clan, the guild, and the market organize who learns from whom. We argue that medieval European institutions such as guilds, and specific features such as journeymanship, can explain the rise of Europe relative to regions that relied on the transmission of knowledge within closed kinship systems (extended families or clans).

We develop a theory that rationalizes the use of a dominant unit of account in an economy. Agents enter into non-contingent contracts with a variety of business partners. Trade unfolds sequentially in credit chains and is subject to random matching. By using a dominant unit of account, agents can lower their exposure to relative price risk, avoid costly default, and create more total surplus. We discuss conditions under which it is optimal to adopt circulating government paper as the dominant unit of account, and the optimal choice of "currency areas" when there is variation in the intensity of trade within and across regions.

We develop a theory of parent-child relations that rationalizes the choice between alternative parenting styles (as set out in Baumrind 1967). Parents maximize an objective function that combines Beckerian altruism and paternalism towards children. They can affect their children's choices via two channels: either by influencing children's preferences or by imposing direct restrictions on their choice sets. Different parenting styles (authoritarian, authoritative, and permissive) emerge as equilibrium outcomes, and are affected both by parental preferences and by the socioeconomic environment. Parenting style, in turn, feeds back into the children's welfare and economic success. The theory is consistent with the decline of authoritarian parenting observed in industrialized countries, and with the greater prevalence of more permissive parenting in countries characterized by low inequality.

The economic theory of fertility choice builds predominantly on the unitary model of the household, in which there is a single household utility function and potential intra-household disagreement is abstracted from. Empirical evidence suggests, however, that many (potential) mothers and fathers disagree on whether to have children, on how many children to have, and on when to have them. In this paper, we review existing work that brings models of intrahousehold conflict and bargaining to bear on fertility choice, and we point out promising future directions for this line of research.

Much of macroeconomics is concerned with the allocation of physical capital, human capital, and labor over time and across people. The decisions on savings, education, and labor supply that generate these variables are made within families. Yet the family (and decision-making in families) is typically ignored in macroeconomic models. In this chapter, we argue that family economics should be an integral part of macroeconomics, and that accounting for the family leads to new answers to classic macro questions. Our discussion is organized around three themes. We start by focusing on short and medium run fluctuations, and argue that changes in family structure in recent decades have important repercussions for the determination of aggregate labor supply and savings. Next, we turn to economic growth, and describe how accounting for families is central for understanding differences between rich and poor countries and for the determinants of long-run development. We conclude with an analysis of the role of the family as a driver of political and institutional change.

We argue that one major cause of the U.S. postwar baby boom was the rise in female labor supply during World War II. We develop a quantitative dynamic general equilibrium model with endogenous fertility and female labor-force participation decisions. We use the model to assess the impact of the war on female labor supply and fertility in the decades following the war. For the war generation of women, the high demand for female labor brought about by mobilization leads to an increase in labor supply that persists after the war. As a result, younger women who turn adult in the 1950s face increased labor-market competition, which impels them to exit the labor market and start having children earlier. The effect is amplified by the rise in taxes necessary to pay down wartime government debt. In our calibrated model, the war generates a substantial baby boom followed by a baby bust.

This paper reviews Gary Becker's contributions to the economic analysis of fertility, from his 1960 paper introducing the quantity-quality tradeoff to later work linking the economics of fertility to the theory of economic growth.

We discuss the two-way link between culture and economic growth. We present a model of endogenous technical change where growth is driven by the innovative activity of entrepreneurs. Entrepreneurship is risky and requires investments that affect the steepness of the lifetime consumption profile. As a consequence, the occupational choice of entrepreneurship hinges on risk tolerance and patience. Parents expecting their children to become entrepreneurs have an incentive to instill these two values in their children. Cultural transmission is Beckerian, i.e., parents are driven by the desire to maximize their children's happiness. We also consider, in an extension, a paternalistic motive for preference transmission. The growth rate of the economy depends on the fraction of the population choosing an entrepreneurial career. How many entrepreneurs there are in a society hinges, in turn, on parental investments in children's patience and risk tolerance. There can be multiple balanced-growth paths, where in faster-growing countries more people exhibit an ``entrepreneurial spirit." We discuss applications of models of endogenous preferences to the analysis of socio-economic transformations, such as the British Industrial Revolution. We also discuss empirical studies documenting the importance of culture and preference heterogeneity for economic growth.

Child labor is often condemned as a form of exploitation. I explore how the notion of exploitation, as used in everyday language, can be made precise in economic models of child labor. Exploitation is defined relative to a specific social welfare function. I first show that under the standard dynastic social welfare function, which is commonly applied to intergenerational models, child labor is never exploitative. In contrast, under an inclusive welfare function, which places additional weight on the welfare of children, child labor is always exploitative. Neither welfare function captures the more gradual distinctions that common usage of the term exploitation allows. I resolve this conflict by introducing a welfare function with minimum altruism, in which child labor in a given family is judged relative to a specific social standard. Under this criterion, child labor is exploitative only in families where the parent (or guardian) displays insufficient altruism towards the child. I argue that this welfare function best captures the conventional concept of exploitation and has useful properties for informing political choices regarding child labor.

Women's rights and economic development are highly correlated. Today, the discrepancy between the legal rights of women and men is much larger in developing compared to developed countries. Historically, even in countries that are now rich women had few rights before economic development took off. Is development the cause of expanding women's rights, or conversely, do women's rights facilitate development? We argue that there is truth to both hypotheses. The literature on the economic consequences of women's rights documents that more rights for women lead to more spending on health and children, which should benefit development. The political-economy literature on the evolution of women's rights finds that technological change increased the costs of patriarchy for men, and thus contributed to expanding women's rights. Combining these perspectives, we discuss the theory of Doepke and Tertilt (2009), where an increase in the return to human capital induces men to vote for women's rights, which in turn promotes growth in human capital and income per capita.

The nineteenth century witnessed dramatic improvements in the legal rights of married women. Given that they took place long before women gained the right to vote, these changes amounted to a voluntary renouncement of power by men. In this paper, we investigate men's incentives for sharing power with women. In our model, women's legal rights set the marital bargaining power of husbands and wives. We show that men face a tradeoff between the rights they want for their own wives (namely none) and the rights of other women in the economy. Men prefer other men's wives to have rights because men care about their own daughters and because an expansion of women's rights increases educational investments in children. We show that men may agree to relinquish some of their power once technological change increases the importance of human capital. We corroborate our argument with historical evidence on the expansion of women's rights in England and the United States.

Child labor is a persistent phenomenon in many developing countries. In recent years, support has been growing among rich-country governments and consumer groups for the use of trade policies, such as product boycotts and the imposition of international labor standards, to reduce child labor in poor countries. In this paper, we discuss research on the long-run implications of such policies. In particular, we demonstrate that such measures may have the unintended side effect of lowering domestic support for banning child labor within developing countries, and thus may contribute to the persistence of the child-labor problem.

How is the quality of public education affected by the presence of private schools for the rich? Theory and evidence suggest that the link depends crucially on the political system. We develop a theory that integrates private education and fertility decisions with voting on public schooling expenditures. We find that the presence of a large private education sector benefits public schools in a broad-based democracy where politicians are responsive to low-income families, but crowds out public-education spending in a society that is politically dominated by the rich. The main predictions of the theory are consistent with state-level and micro data from the United States as well as cross-country evidence from the PISA study.

Seit Mitte der achtziger Jahre hat die neue Wachstumstheorie verstärkt Aufmerksamkeit auf Humankapital als eine Quelle des Wirtschaftswachstums gelenkt. Neuere empirische Ergebnisse weisen allerdings darauf hin, dass Bildungsinvestitionen nur geringe soziale Externalitäten erzeugen und dass der direkte Beitrag des Humankapitals zum Wirtschaftswachstum relativ gering ist. In dieser Arbeit wird der Beitrag des Humankapitals zur Wirtschaftsentwicklung im Rahmen der langfristigen Wachstumstheorie dargestellt, deren Gegenstand ist, den Übergang von Ländern von vor-industrieller Stagnation zu stetigem Wirtschaftswachstum zu erklären. Hier erweist sich, dass Humankapital nicht nur direkte Produktivitätseffekte erzeugt, sondern auch als Auslöser verschiedener entwicklungsfördernder politischer Reformen dienen kann.

Following a phase of near-constant living standards lasting from Stone Age until the onset of the Industrial Revolution, a large number of countries have experienced growth takeoffs, in which stagnation gives way to sustained economic growth. What causes some countries to enter a growth takeoff, while others remain poor? We discuss three mechanisms that can trigger a growth takeoff in a country previously captured in a poverty trap: fertility decline, structural change, and accelerating technological progress.

In this paper we investigate the positive and normative consequences of child-labor restrictions for economic aggregates and welfare. We argue that even though the laissez-faire equilibrium may be inefficient, there are usually better policies to cure these inefficiencies than the imposition of a child-labor ban. Given this finding, we investigate the potential political-economic reasons behind the emergence and persistence of child-labor legislation. Our investigation is based on a structural dynamic general equilibrium model that provides a coherent and uniform framework for our analysis.

An overview of my research on economic growth.

This study quantitatively assesses the effects of inflation through changes in the value of nominal assets. It documents nominal asset positions in the United States across sectors and groups of households and estimates the wealth redistribution caused by a moderate inflation episode. The main losers from inflation are rich, old households, the major bondholders in the economy. The main winners are young, middle-class households with fixed-rate mortgage debt. Besides transferring resources from the old to the young, inflation is a boon for the government and a tax on foreigners. Lately, the amount of U.S. nominal assets held by foreigners has grown dramatically, increasing the potential for a large inflation-induced wealth transfer from foreigners to domestic households.

This paper shows that a zero-sum redistribution of wealth within a country can have persistent aggregate effects. Motivated by the case of an unanticipated inflation episode, we consider redistribution shocks that shift resources from old to young households. Aggregate effects arise because there are asymmetries in the reaction of winners and losers to changes in wealth. We focus on two sources of asymmetries: differences in the average age of winners and losers, and differences in their labor force status.

We develop general recursive methods to solve for optimal contracts in dynamic principal-agent environments with hidden states and hidden actions. In our baseline model, the principal observes nothing other than transfers. Nevertheless, optimal incentive-constrained insurance can be attained. Starting from a general mechanism with arbitrary communication, randomization, full history dependence, and without restrictions on preferences or technology, we show how the optimal contract can be efficiently implemented as a recursive direct mechanism. Our methods generalize to environments with multiple actions and additional states, some of which may be observable. The key to implementing these extensions is to introduce multiple layers of off-path utility bounds.

We develop a positive theory of the adoption of child labor laws. Workers who compete with children in the labor market support the introduction of a child labor ban, unless their own working children provide a large fraction of family income. Fertility decisions lock agents into specific political preferences, and multiple steady states can arise. The introduction of child labor laws can be triggered by skill-biased technological change that induces parents to choose smaller families. The theory can account for the observation that in Britain regulations were first introduced after a period of rising wage inequality, and coincided with rapid fertility decline.

An earlier version of this paper circulated under the title: "Voting with your Children: A Positive Analysis of Child-Labor Laws."

I compare the predictions of three variants of the altruistic parent model of Barro and Becker for the relationship between child mortality and fertility. In the baseline model fertility choice is continuous, and there is no uncertainty over the number of surviving children. The baseline model is contrasted to an extension with discrete fertility choice and stochastic mortality and a setup with sequential fertility choice. The quantitative predictions of the models are remarkably similar. While in each model the total fertility rate falls as child mortality declines, the number of surviving children increases. The results suggest that factors other than declining infant and child mortality are responsible for the large decline in net reproduction rates observed in industrialized countries over the last century.

The British Industrial Revolution was a time of major socio-economic transformations. We review a number of recent economic theories which analyze the transition from a preindustrial world characterized by high fertility, stationary standards of living, and rigid social hierarchies to modern capitalism. One of the key social transformations that accompanied the Industrial Revolution was the economic decline of the aristocracy. Standard theories of wealth inequality cannot explain why the aristocrats, in spite of their superior wealth and education, failed to be the main protagonists and beneficiaries of industrialization. We discuss recent research based on a model of endogenous preferences that is consistent with the demise of aristocracy.

The empirical literature on monetary policy shocks documents that contractionary shocks are followed by a persistent rise in interest rates and a persistent fall in output. Standard monetary business cycle models can account for the initial effects of monetary shocks, but have difficulty generating persistence. In this paper, I examine whether frictions that affect the asset allocation decisions of households can lead to persistent effects. In the model economy, households hold two assets, one used for transactions (the checking account) and one used for investment (the savings account). There is a small transaction cost for moving funds between the accounts. Another key feature of the economy is that the business sector accumulates retained earnings and credits profits to the consumers only with a delay. I show that in this environment monetary shocks have persistent effects even when the adjustment cost is very small.

In every developed country, the economic transition from pre-industrial stagnation to modern growth was accompanied by a demographic transition from high to low fertility. Even though the overall pattern is repeated, there are large cross-country variations in the timing and speed of the demographic transition. What accounts for falling fertility during the transition to growth? To answer this question, this paper develops a unified growth model which delivers a transition from stagnation to growth, accompanied by declining fertility. The model is used to determine whether government policies that affect the opportunity cost of education can account for cross-country variations in fertility decline. Among the policies considered, education subsidies have only minor effects, while accounting for child-labor regulations is crucial. Apart from influencing fertility, the policies also have large effects on the evolution of the income distribution in the course of development.

We assess the merits of different education systems in a framework that accounts for the joint decision problem of parents regarding fertility and education. Specifically, we compare the implications of a public and a private schooling regime for economic growth and inequality. We find that private schooling leads to higher growth when there is little inequality in human capital endowments across families. In contrast, when inequality is high, public education yields higher growth by reducing fertility differentials. In addition, public schooling leads to income convergence, while private schooling can result in ever increasing inequality. Our analysis highlights the importance of accounting for endogenous fertility differentials when analyzing educational policies.

We develop a new theoretical link between inequality and growth. In our model, fertility and education decisions are interdependent. Poor parents decide to have many children and invest little in education. A mean-preserving spread in the income distribution increases the fertility differential between the rich and the poor, which implies that more weight gets placed on families who provide little education. Consequently, an increase in inequality lowers average education and, therefore, growth. We find that this fertility-differential effect accounts for most of the empirical relationship between inequality and growth.

In many developing countries, the institutional framework governing economic life has its roots in the colonial period, when the interests of European settlers clashed with those of the native population or imported slaves. We examine the economic implications of this conflict in a framework where institutions are represented by the number of people with property-rights protection, i.e., "gun owners." In the model, gun owners can protect their own property, they can exploit others who do not own guns, and they may decide to extend property rights by handing out guns to previously unarmed people. The theory generates a "reversal of fortune" between colonies with many and few oppressed: income per capita is initially highest in colonies with many oppressed that can be exploited by gun owners, but later on excessive concentration of economic power becomes a hindrance for development.