We explore an economy where number of children is endogenously determined and the cost of raising children is determined by the total number of children in the economy. We show that number of children will be too small compared to the social optimum and that the network effect may magnify the decline of "birthrate". Our analysis demonstrates that public policies to increase birthrate must take this into account when determining subsidies.
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Paper provided by Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University in its series Discussion Paper with number
275.