The transition to market economies in an endogenous growth model with altruistic agents

This paper considers an endogenous transition from a self-sufficient tradit ional economy to a market economy and its consequences on fertility and gro wth. The transition can occur if private intergenerational transfers are un able to secure old-age consumption as adequately as savings on capital mark ets; otherwise individuals stay in the traditional economy unless the mass- production technology in the market economy is sufficiently more advanced t han individually accessible technologies. Markets emerge only if per capita output exceeds a certain level given a fixed cost of forming markets. The transition reduces fertility and promotes growth under plausible restrictio ns.