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Millian Efficiency with Endogenous Fertility

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Author Info

  • J. Ignacio Conde-Ruiz

    ()
    (Spanish Prime Minister's Economic Bureau and FEDEA (Fundación de Estudios de Economía Aplicada))

  • Eduardo L. Gimenez

    ()
    (Universidade de Vigo)

  • Mikel Perez-Nievas

    ()
    (Universidade de Santiago de Compostela)

Abstract

This paper is concerned with an extension of the notion of Pareto efficiency, referred to as Millian efficiency, to evaluate the performance of symmetric allocations in an overlapping generations setting with endogenous fertility. The criterium of Pareto dominance underlying the notion of Millian efficiency is based exclusively on preferences of those agents who are actually born, and allows only for welfare comparisons of symmetric allocations (i.e, allocations in which all living individuals of the same generation take the same decisions). The main contributions of the paper are the following. First, we provide necessary (static) and sufficient (dynamic) conditions to determine whether an allocation is Millian efficient or not, and we show that the sufficient conditions for dynamic efficiency offered by Cass (1972) and Balasko and Shell (1980) cannot be straightforward applied when fertility decisions are endogenous. Second, we extend the two Fundamental Theorems of Welfare Economics to a framework with endogenous population by characterizing Millian efficient allocations as the equilibria of a decentralized price mechanism. Finally, we present a condition to identify equilibrium allocations as dynamically efficient that exclusively uses the sequence of prices associated to such decentralized equilibria.

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Bibliographic Info

Paper provided by IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia in its series Documentos de trabajo - Analise Economica with number 0037.

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Length: 37 pages
Date of creation: Feb 2006
Date of revision:
Publication status: Published in Review of Economic Studies, January 2010, pages 154-187
Handle: RePEc:edg:anecon:0037

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Keywords: Endogenous fertility; Pareto optimality; Dynamic efficiency;

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References

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  1. Samuelson, Paul A, 1975. "The Optimum Growth Rate for Population," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 531-38, October.
  2. Eckstein, Zvi & Stern, Steven & Wolpin, Kenneth I, 1988. "Fertility Choice, Land, and the Malthusian Hypothesis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(2), pages 353-61, May.
  3. 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.
  4. Michel, Philippe & Pestieau, P, 1993. "Population Growth and Optimality: When Does Serendipity Hold?," Journal of Population Economics, Springer, vol. 6(4), pages 353-62, November.
  5. Barro, R.J. & Becker, G.S., 1988. "Fertility Choice In A Model Of Economic Growth," University of Chicago - Economics Research Center 88-8, Chicago - Economics Research Center.
  6. Mikhail Golosov & Larry E. Jones & Michèle Tertilt, 2006. "Efficiency with Endogenous Population Growth," Discussion Papers 05-012, Stanford Institute for Economic Policy Research.
  7. Chattopadhyay, Subir & Gottardi, Piero, 1999. "Stochastic OLG Models, Market Structure, and Optimality," Journal of Economic Theory, Elsevier, vol. 89(1), pages 21-67, November.
  8. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1982. "Population size and the social welfare functions of Bentham and Mill," Economics Letters, Elsevier, vol. 10(1-2), pages 61-64.
  9. Cigno, Alessandro, 1992. "Children and Pensions," Journal of Population Economics, Springer, vol. 5(3), pages 175-83, August.
  10. Eckstein, Zvi & Wolpin, Kenneth I., 1985. "Endogenous fertility and optimal population size," Journal of Public Economics, Elsevier, vol. 27(1), pages 93-106, June.
  11. Shell, Karl, 1971. "Notes on the Economics of Infinity," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1002-11, Sept.-Oct.
  12. Balasko, Yves & Shell, Karl, 1980. "The overlapping-generations model, I: The case of pure exchange without money," Journal of Economic Theory, Elsevier, vol. 23(3), pages 281-306, December.
  13. Alessandro Cigno & Martin Werding, 2007. "Children and Pensions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033690, December.
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  17. repec:hal:cesptp:halshs-00185259 is not listed on IDEAS
  18. Bental, Benjamin, 1989. "The Old Age Security Hypothesis and Optimal Population Growth," Journal of Population Economics, Springer, vol. 1(4), pages 285-301.
  19. Philippe Michel & Bertrand Wigniolle, 2007. "On Efficient Child Making," Economic Theory, Springer, vol. 31(2), pages 307-326, May.
  20. Galor, Oded & Ryder, Harl E., 1991. "Dynamic efficiency of steady-state equilibria in an overlapping-generations model with productive capital," Economics Letters, Elsevier, vol. 35(4), pages 385-390, April.
  21. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1985. "Population Size: Individual Choice and Social Optima," The Quarterly Journal of Economics, MIT Press, vol. 100(2), pages 321-34, May.
  22. Assaf Razin & Efraim Sadka, 1995. "Population Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262181606, December.
  23. Deardorff, Alan V, 1976. "The Optimum Growth Rate for Population: Comment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(2), pages 510-15, June.
  24. Samuelson, Paul A, 1976. "The Optimum Growth Rate for Population: Agreement and Evaluations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(2), pages 516-25, June.
  25. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
  26. Cass, David, 1972. "On capital overaccumulation in the aggregative, neoclassical model of economic growth: A complete characterization," Journal of Economic Theory, Elsevier, vol. 4(2), pages 200-223, April.
  27. Cigno, Alessandro, 1993. "Intergenerational transfers without altruism : Family, market and state," European Journal of Political Economy, Elsevier, vol. 9(4), pages 505-518, November.
  28. Molina-Abraldes, Antonio & Pintos-Clapes, Juan, 2003. "A complete characterization of Pareto optimality for general OLG economies," Journal of Economic Theory, Elsevier, vol. 113(2), pages 235-252, December.
  29. van Groezen, Bas & Leers, Theo & Meijdam, Lex, 2003. "Social security and endogenous fertility: pensions and child allowances as siamese twins," Journal of Public Economics, Elsevier, vol. 87(2), pages 233-251, February.
  30. Edmond S. Phelps, 1964. "Second Essay on the Golden Rule of Accumulation," Cowles Foundation Discussion Papers 173, Cowles Foundation for Research in Economics, Yale University.
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  1. Mas Niños, Más Pensiones
    by J. Ignacio Conde-Ruiz in Nada Es Gratis on 2014-02-27 07:00:04
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