Family Tax Policy with Heterogeneous Altruistic Households

This paper presents a general equilibrium model, with overlapping generations and heterogeneous altruistic households. Taking into account the heterogeneity of households allows one to develop an alternative framework to explain why empirical estimations find pro-nativist fiscal subsidies to have only a small aggregate effect on the fertility rate of an economy, while fiscal subsidies have a larger effect on the fertility of the households who are their beneficiaries, as generally highlighted by theoretical models on fertility decisions. On the basis of this framework, different policy experiments are performed. First, an increase in pro-nativist fiscal subsidies is targeted only to the households having the lowest initial level of labour income; second, an increase in pro-nativist fiscal subsidies is generalized to all the groups of households; and, third, a change in the tax rate on the inter-generational transfers left by households with the highest labour income is assessed as a policy tool alternative to the use of pro-nativist fiscal subsidies.