CDDRL Working Papers
This paper presents empirical evidence on a specific mechanism through which demographic transition affects economic growth. The evidence provides support for the models of demographic transition emphasizing the demand for children. Using a panel of African countries during 1985-2000, I show that the AIDS epidemic effects the total fertility rates positively and the school enrollment rates negatively. These patterns are consistent with the theoretical models that argue the existence of a precautionary demand for children in the face of uncertainty about child survival. Parents, who are faced with a high mortality environment for young adults, choose to have more children and provide each of them with less education, leading a reversal in the fertility transition and a reduction in the aggregate amount of human capital investment. The empirical estimates show that a country that has witnessed the average increase in AIDS incidence for Africa, have 0.8 more births and 30 percentage points less primary school enrollment since 1985. The results imply lower economic growth and welfare for the current and future African generations.