This paper presents a quantitative theory of development that highlights three mechanisms that relate schooling, fertility, and growth. First, we point out that in the early stages of development, fertility and schooling may rise together as the schooling of younger children increases their relative contribution to family income when they turn working age. Second, the model contains a supply-side theory of schooling that generates a rise in schooling independent of technological change. Third, we introduce a direct negative effect of industrialization on fertility that does not operate through human capital and the quantity-quality tradeoff. An initial quantitative assessment of the theoretical mechanisms is conducted by calibrating and applying the model to United States history from 1800 to 2000. We find that the demise in family production is an important factor reducing fertility in the 19th century and schooling of older children is dominant factor reducing fertility in the 20th century. The same model is applied to England from 1740 to 1940, where we offer two complimentary explanations for the rise in fertility from 1740 to 1820. The first is based on the rapid expansion in the cottage industry and the second on the increased relative productivity of children. We also find that the subsequent fall in fertility from 1820 to 1940 cannot be explained without introducing child labor/compulsory schooling laws. Copyright Springer Science+Business Media, LLC 2006Economic development, Fertility, Schooling, Family production,

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Available evidence suggests that the generations of most families are linked by altruistic human capital investment, rather than by altruistic financial transfers. What is the consequence of this distinction for the Ricardian Equivalence Theorem? We use a realistically calibrated overlapping generations model to show that, despite the presence of altruistic human capital transfers, deficit policies are likely to reduce the aftertax wealth of future generations. Furthermore, the majority of households in the current‐period population would vote in favor of a deficit‐financed tax cut.

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