Mortality, Fertility, and Persistent Income Inequality

Abstract

Many developing countries are plagued by persistent inequality in income distribution. While a growing body of economic‐demographic literature emphasizes differential fertility channel, this paper investigates differential child mortality—differences in child mortality across income groups—as a critical link through which income inequality persists. Using an overlapping generations model in which both child mortality and fertility are endogenously determined by parental choice, this paper demonstrates that differential child mortality and its interaction with differential fertility may generate an “income inequality trap.” The trap is characterized by higher child mortality and lower degree of skill formation among the poorer households. The model can also explain the behavior of aggregate fertility and mortality rates for countries at various stages of development, consonant with patterns of demographic transition. The results indicate that provision of public health that raises the productivity of private health spending may be an effective way to reduce income inequality.

Effect of Human Capital Investment on Income Inequality in Kenya

“…This is because the allocation of resources is still unequal in these socially stratified regions. Children who live in more affluent areas have better access to educational opportunities and healthcare than their poorer neighborhood peers, which leads to greater income disparities in later life (Sarkar, 2008). As a result of economic stratification and large neighborhood-wide feedback effects, income inequality persists through generations.…”