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Fertility, Female Labor Supply, and Family Policy

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  • Hans Fehr
  • Daniela Ujhelyiova

Abstract

The present paper develops a general equilibrium model with overlapping generations and endogenous fertility in order to analyze the interaction between public policy and household labor supply and fertility decisions. The model's benchmark equilibrium reflects the current family policy consisting of joint taxation of married couples, monetary transfers and in-kind benefits which reduce the time cost of children. Then we simulate alternative reforms of the tax and the child benefit system and analyze the long-run impact on fertility and female labor supply. Our simulations indicate three central results: First, policies which simply increase the family budget either via higher transfers (direct or in-kind) or via family splitting increase fertility but reduce female employment. Second, increasing tax revenues due to the introduction of individual taxation would increase female employment but reduce fertility. Third, revenue neutral policies such as a reform of the benefit structure or a move towards individual taxation combined with an increase in in-kind benefits may achieve both goals and therefore yield significant welfare gains.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-05/cesifo1_wp3455.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3455.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3455

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Keywords: stochastic fertility; general equilibrium life cycle model;

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References

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  1. DE LA CROIX, David & DOEPKE, Matthias, 2001. "Inequality and Growth : Why Differential Fertility Matters," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Patricia Apps & Ray Rees, 2004. "Fertility, Taxation and Family Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(4), pages 745-763, December.
  3. Eissa, Nada & Hoynes, Hilary Williamson, 2004. "Taxes and the labor market participation of married couples: the earned income tax credit," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1931-1958, August.
  4. Galor, Oded & Weil, David N, 1996. "The Gender Gap, Fertility, and Growth," American Economic Review, American Economic Association, vol. 86(3), pages 374-87, June.
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  6. 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.
  7. Yishay Maoz & Moshe Hazan & Matthias Doepke, 2008. "The Baby Boom and World War II: A Macroeconomic Analysis," 2008 Meeting Papers 668, Society for Economic Dynamics.
  8. Larry E. Jones & Alice Schoonbroodt & Michèle Tertilt, 2008. "Fertility Theories: Can They Explain the Negative Fertility-Income Relationship?," NBER Working Papers 14266, National Bureau of Economic Research, Inc.
  9. Oded Galor, 2012. "The demographic transition: causes and consequences," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 6(1), pages 1-28, January.
  10. Ahn, N. & Mira, P., 1999. "A Note on the Changing Relationship Between Fertility and Female Employment Rates in Developed Countries," Papers 9903, Centro de Estudios Monetarios Y Financieros-.
  11. Andrés Erosa & Luisa Fuster & Diego Restuccia, 2002. "Fertility Decisions and Gender Differences in Labor Turnover, Employment, and Wages," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(4), pages 856-891, October.
  12. Rafael Lalive & Josef Zweimüller, 2009. "How does Parental Leave Affect Fertility and Return to Work? Evidence from Two Natural Experiments," The Quarterly Journal of Economics, MIT Press, vol. 124(3), pages 1363-1402, August.
  13. Selahattin Imrohoroglu & Sagiri Kitao, 2009. "Labor Supply Elasticity and Social Security Reform," Working Papers, Center for Retirement Research at Boston College wp2009-5, Center for Retirement Research, revised Mar 2009.
  14. José María Da Rocha & Luisa Fuster, 2006. "Why Are Fertility Rates And Female Employment Ratios Positively Correlated Across O.E.C.D. Countries?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1187-1222, November.
  15. Viktor Steiner & Katharina Wrohlich, 2004. "Household Taxation, Income Splitting and Labor Supply Incentives: A Microsimulation Study for Germany," Discussion Papers of DIW Berlin 421, DIW Berlin, German Institute for Economic Research.
  16. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
  17. Ludger Woessmann, 2004. "How Equal Are Educational Opportunities? Family Background and Student Achievement in Europe and the United States," CESifo Working Paper Series 1162, CESifo Group Munich.
  18. Elizabeth M. Caucutt & Nezih Guner & John Knowles, 2002. "Why Do Women Wait? Matching, Wage Inequality, and the Incentives for Fertility Delay," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(4), pages 815-855, October.
  19. Daniela Del Boca & Silvia Pasqua & Chiara Pronzato, 2008. "Motherhood and market work decisions in institutional context: A European perspective," Working Papers 011, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
  20. Nezih Guner & John Knowles, 2009. "Why is the rate of single-parenthood lower in Canada than in the U.S.? A dynamic equilibrium analysis of welfare policies," Canadian Journal of Economics, Canadian Economics Association, vol. 42(1), pages 56-89, February.
  21. Hans Fehr & Manuel Kallweit & Fabian Kindermann, 2009. "Marital Risk, Family Insurance, and Public Policy," SOEPpapers on Multidisciplinary Panel Data Research 226, DIW Berlin, The German Socio-Economic Panel (SOEP).
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Cited by:
  1. Bick, Alexander, 2010. "The quantitative role of child care for female labor force participation and fertility," MPRA Paper 25474, University Library of Munich, Germany.
  2. Hans Fehr & Manuel Kallweit & Fabian Kindermann, 2013. "Reforming Family Taxation in Germany: Labor Supply vs. Insurance Effects," SOEPpapers on Multidisciplinary Panel Data Research 613, DIW Berlin, The German Socio-Economic Panel (SOEP).

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