From decay to growth: A demographic transition to economic growth

Altruistic parents rationally choose fertility and human capital investments in their children. A rising rate of return to human capital investment and a conditional external effect in human capital investment produce: (1) two development regimes, a Malthusian regime of high fertility and no human capital investment and a perpetual growth regime of low fertility and rising human capital, (2) conditional human capital convergence within regimes, (3) a demographic transition to economic growth, and (4) accelerating growth. As richer countries grow, the conditional external effect continually raises the rate of return on human capital and causes a demographic transition to economic growth by Malthusian countries.