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Social Security, Saving and Fertility

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  • Mikko Puhakka

    ()
    (Department of Economics, University of Oulu)

  • Matti Viren

    ()
    (Department of Economics and the Public Choice Research Centre, University of Turku and Bank of Finland)

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    Abstract

    We investigate the effect of government policies on fertility in a model where children are mainly seen as investment goods. To illustrate this effect we construct a simple overlapping generations economy in which households (parents) can invest both in children and financial assets. An introduction of the public social security system lowers the incentive to have children, i.e. fertility will be lower. This is an important negative externality. We test some of the model’s basic implications using unique long historical panel data from 11 countries for the period 1750–2000. In addition, we use two additional, more recent, data sets to reinforce the empirical results obtained with historical data. These analyses show that there is a positive relationship between ageing and fertility if we control for the key determinants of fertility. By contrast, there is a strong negative relationship between (various indicators of) social security and fertility. Empirical evidence is found for the notion that child support increases fertility.

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    Bibliographic Info

    Article provided by Finnish Economic Association in its journal Finnish Economic Papers.

    Volume (Year): 25 (2012)
    Issue (Month): 1 (Spring)
    Pages: 28-42

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    Handle: RePEc:fep:journl:v:25:y:2012:i:1:p:28-42

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    Web page: http://www.taloustieteellinenyhdistys.fi
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    1. Francesco Billari & Vincenzo Galasso, 2010. "What explains fertilit? Evidence from Italian Pension reforms," Working Papers 369, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    2. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Munich Reprints in Economics 938, University of Munich, Department of Economics.
    3. Alessandro Cigno, 2005. "A constitutional theory of the family," CHILD Working Papers wp14_05, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
    4. Michele Boldrin & Mariacristina De Nardi & Larry E. Jones, 2005. "Fertility and Social Security," NBER Working Papers 11146, National Bureau of Economic Research, Inc.
    5. Michele Boldrin & Larry E. Jones, 2002. "Mortality, Fertility, and Saving in a Malthusian Economy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(4), pages 775-814, October.
    6. Rosati, Furio Camillo, 1996. "Social security in a non-altruistic model with uncertainty and endogenous fertility," Journal of Public Economics, Elsevier, vol. 60(2), pages 283-294, May.
    7. Cigno, Alessandro, 1993. "Intergenerational transfers without altruism : Family, market and state," European Journal of Political Economy, Elsevier, vol. 9(4), pages 505-518, November.
    8. LEROUX, Marie-Louise & PESTIEAU, Pierre, 2011. "Social security and family support," CORE Discussion Papers 2011045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Ehrlich, Isaac & Lui, Francis T, 1991. "Intergenerational Trade, Longevity, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1029-59, October.
    10. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
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