Does Child Support Increase the Number of Children? An Involuntary Employment-Specific Approach

Recently, as low birth rates and the aging of society have intensified, considerable analysis is being conducted using overlapping generations models with endogenous birth rates. However, most previous studies have assumed full employment. Since it is the case that unemployment does exist in reality, this paper employs a labor-union wage-negotiation model that models unemployment to analyze the effects of child-support tax on employment and number of children. First, an increase in child-support tax increases the unemployment rate and decreases capital stock. A new finding is that an increase in unemployment decreases the number of children through decreasing disposable income. Also, when certain conditions are satisfied the number of children per capita in the economy as a whole also decreases with introduction of child-support tax. This paper concludes that excessive child-support tax can have opposite the intended effect. Another new finding is that an increase in the unemployment insurance benefits rate decreases the number of children by decreasing disposable income through increasing unemployment.