Endogenous Fertility Policy
AbstractIn this Paper, we study the role of subsidies to fertility in ensuring the political viability of unfunded social security (SS). In our model, agents are heterogeneous in age and income. Young generations confront promises made previously by older generations, and in turn choose current levels of fertility subsidies, and future levels of social security benefits. We find that subsidies to the costs of children expand the set of equilibria, making social security viable where it would otherwise have to be abandoned. Moreover, the model successfully captures the observed evolution of social security and family support systems during the demographic transition. Our results indicate that the seemingly explosive evolution of SS taxes will be curbed once the underlying demographic transition is completed, after which the SS system will converge to a steady state lower than simple extrapolation of current trends would imply, and fertility will rebound with the aid of higher subsidy levels.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4575.
Date of creation: Aug 2004
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Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
- J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-02-13 (All new papers)
- NEP-MAC-2005-02-13 (Macroeconomics)
- NEP-PBE-2005-02-13 (Public Economics)
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- Borck, Rainald & Wrohlich, Katharina, 2008.
"Preferences for Childcare Policies: Theory and Evidence,"
IZA Discussion Papers
3694, Institute for the Study of Labor (IZA).
- Borck, Rainald & Wrohlich, Katharina, 2011. "Preferences for childcare policies: Theory and evidence," European Journal of Political Economy, Elsevier, vol. 27(3), pages 436-454, September.
- Rainald Borck & Katharina Wrohlich, 2008. "Preferences for Childcare Policies: Theory and Evidence," Discussion Papers of DIW Berlin 827, DIW Berlin, German Institute for Economic Research.
- Rainald Borck & Katharina Wrohlich, 2008. "Preferences for Childcare Policies: Theory and Evidence," SOEPpapers on Multidisciplinary Panel Data Research 140, DIW Berlin, The German Socio-Economic Panel (SOEP).
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