The Uncertain Lifetime and the Timing of Human Capital Investment

Sebnem Kalemli-Ozcan, Journal of Population Economics 21(3), 557-572, July .


I examine the effects of mortality decline on fertility and human capital investment decision of parents taking into account the uncertainty about child survival. The existence of such uncertainty implies that in principle parents can choose between two different strategies regarding the timing of the educational investment. Education may be provided before or after uncertainty about child survival is realized. I propose a model, where parents decide on their fertility before the uncertainty is realized but they choose to invest only in human capital of their surviving children. The model implies a positive relationship between mortality and fertility and a negative one between mortality and educational investment. It has been argued elsewhere that since in reality most of the mortality decline occurred in infancy it should not affect the human capital investment decision, which comes later in life. Thus increased survival chances should not promote growth by raising the human capital investment. This paper argues the contrary and proposes a mechanism where mortality decline at any age before the teen years can promote growth by raising human capital investment regardless of the timing of the educational investment.

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