Gender gap, capital accumulation and the demographic transition

This paper focuses on explaining the demographic transition and some of the broad patterns that are associated with it. We present an endogenous growth model that incorporates altruism and son preference within the family as well as gender wage gap and gender wage discrimination in the labour market. We show that with the accumulation of physical capital and human capital, the output share of mental labour increases and the gender wage gap narrows. In the early stages of economic development, gender discrimination is becoming prevalent and the substitution effect of capital accumulation, which raises the cost of child rearing, is dominated by the income effect, so the growth rate of population increases with income. When the degree of gender wage discrimination starts to decline, the increased cost of child rearing induces families to invest more in the human capital of children and the growth rate of the population falls. The quantitative analysis shows that gender wage discrimination is indeed an important contributor to the demographic transition.