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By introducing a debt management rule into an extended model of Lapan and Enders (1990), we analyze a dynamic relationship among public debt, fertility, and per capita income growth. The rule proposed is simple and intuitive: public debt newly issued is an increasing function of the government's primary balance. We show that the public debt-GDP ratio decreases monotonically toward zero, and both fertility rate and per capita income growth rate continue to increase in transition, if an initially indebted government adopts a tight management rule. Unfortunately, the long-run growth rate is low and the long-run fertility rate is high relative to the social optimal because of capital externality and a trade-off between fertility and bequests. The optimal policy requires an additional policy instrument, that is, a subsidy for bequests.
