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<p>This paper proposes an investigation into the effect of income bipolarization on the recent decline in fertility in developed economies. We construct an empirically compatible three-period overlapping-generations model featuring endogenous child-bearing decisions of heterogeneous individuals under the Melitz (Econometrica 71(6):1695–1725, 2003) type of monopolistic competition in production, to examine the heterogeneous effects of skill-biased technical change (SBTC) on fertility decisions. Theoretical and numerical analyses reveal that the positive relationship between income and longevity shapes U-shaped fertility patterns, and the total birth decline occurs when skill-biased technical change enlarges markets and widens income inequality, if the initial income inequality is significant. Results suggest that redistributing income from high to low earners would be Pareto-improving because the redistribution increases the variety of goods supplied by children in the future, and high earners enjoy a wide variety of goods with a high probability in the future. For a complementary analysis, it also demonstrates how trade and lower trade costs reinforce the tendency toward declining fertility alongside SBTC, which has a similar effect on fertility decisions to SBTC.</p>

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Skill-biased technical change, demographics, and market size

  • 期刊论文

  • 发表日期：

    2026年4月8日

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  • Koichi Fukumura

摘要

This paper proposes an investigation into the effect of income bipolarization on the recent decline in fertility in developed economies. We construct an empirically compatible three-period overlapping-generations model featuring endogenous child-bearing decisions of heterogeneous individuals under the Melitz (Econometrica 71(6):1695–1725, 2003) type of monopolistic competition in production, to examine the heterogeneous effects of skill-biased technical change (SBTC) on fertility decisions. Theoretical and numerical analyses reveal that the positive relationship between income and longevity shapes U-shaped fertility patterns, and the total birth decline occurs when skill-biased technical change enlarges markets and widens income inequality, if the initial income inequality is significant. Results suggest that redistributing income from high to low earners would be Pareto-improving because the redistribution increases the variety of goods supplied by children in the future, and high earners enjoy a wide variety of goods with a high probability in the future. For a complementary analysis, it also demonstrates how trade and lower trade costs reinforce the tendency toward declining fertility alongside SBTC, which has a similar effect on fertility decisions to SBTC.