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Millian efficiency with endogenous fertility

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  • Mikel Perez-Nievas

    (Universidade de Santiago Compostela)

  • Eduardo L. Gimenez

    (Universidade de Vigo)

  • J. Ignacio Conde-Ruiz

    (FEDEA)

Abstract

Should governments implement policies that affect fertility decisions on efficiency grounds? In this paper, we adress this question by developing 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, and.we present a condition to identify equilibrium allocations as dynamically efficient that exclusively uses the sequence of prices associated to such decentralized equilibria. Finally, we use the results obtained to evaluate the performance of two fundamental institutions of the welfare state, such as public education and social security, in economies with endogenous fertility.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 338.

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Date of creation: 2007
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Handle: RePEc:red:sed007:338

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  1. 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.
  2. L. K. Raut, . "Effects of Social Security on Fertility and Saving: An Overlapping Generations Model," University of Chicago - Population Research Center 87-13, Chicago - Population Research Center.
  3. Mikhail Golosov & Larry E. Jones & Michele Tertilt, 2004. "Efficiency with endogenous population growth," Working Papers 630, Federal Reserve Bank of Minneapolis.
  4. Alessandro Cigno & Martin Werding, 2007. "Children and Pensions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033690, December.
  5. Eckstein, Zvi & Wolpin, Kenneth I., 1985. "Endogenous fertility and optimal population size," Journal of Public Economics, Elsevier, vol. 27(1), pages 93-106, June.
  6. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
  7. 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.
  8. 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.
  9. Alessandro Cigno, 2003. "The Political Economy of Intergenerational Cooperation," CHILD Working Papers, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY wp05_03, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  10. 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.
  11. Philippe Michel & Bertrand Wigniolle, 2007. "On Efficient Child Making," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00185259, HAL.
  12. Cigno, Alessandro, 1992. "Children and Pensions," Journal of Population Economics, Springer, vol. 5(3), pages 175-83, August.
  13. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1985. "Population Size: Individual Choice and Social Optima," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(2), pages 321-34, May.
  14. Bental, Benjamin, 1989. "The Old Age Security Hypothesis and Optimal Population Growth," Journal of Population Economics, Springer, vol. 1(4), pages 285-301.
  15. 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.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  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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Cited by:
  1. Schoonbroodt, Alice & Tertilt, Michèle, 2014. "Property rights and efficiency in OLG models with endogenous fertility," Journal of Economic Theory, Elsevier, vol. 150(C), pages 551-582.
  2. Mikhail Golosov & Larry E. Jones & Michele Tertilt, 2004. "Efficiency with Endogenous Population Growth," NBER Working Papers 10231, National Bureau of Economic Research, Inc.
  3. BAUDIN, Thomas, 2010. "Family policies : what does the standard endogenous fertility model tell us ?," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2010058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Schoonbroodt, Alice & Tertilt, Michèle, 2010. "Who Owns Children and Does it Matter?," CEPR Discussion Papers 7653, C.E.P.R. Discussion Papers.
  5. Fanti, Luciano & Gori, Luca, 2012. "PAYG pensions, tax-cum-subsidy and A-Pareto efficiency," Research in Economics, Elsevier, vol. 66(1), pages 65-71.
  6. Giorgio Fabbri & Raouf Boucekkiney & Fausto Gozzi, 2012. "Egalitarism Under Population Change: the Role of Growth and Lifetime Span," DEGIT Conference Papers c017_007, DEGIT, Dynamics, Economic Growth, and International Trade.
  7. Koichi Miyazaki, 2013. "Pay-as-you-go social security and endogenous fertility in a neoclassical growth model," Journal of Population Economics, Springer, vol. 26(3), pages 1233-1250, July.
  8. Wei-bin Zhang, 2011. "Elastic Labour Supply and Home Production in a Monetary Growth Model," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 9(2), pages 87-100.

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