Advanced Search
MyIDEAS: Login to save this paper or follow this series

Property rights and efficiency in OLG models with endogenous fertility

Contents:

Author Info

  • Schoonbroodt, Alice
  • Tertilt, Michele

Abstract

Is there an economic rationale for pronatalist policies? We propose and analyze a particular market failure that leads to inefficiently low fertility in equilibrium. The friction is caused by the lack of ownership of children: if parents have no claim on their children’s income, the private benefit from producing a child can be smaller than the social benefit. We analyze an overlapping-generations model with fertility choice and parental altruism. Ownership is modeled as a minimum constraint on transfers from parents to children. Using the efficiency concepts proposed in Golosov, Jones, and Tertilt (2007), we find that whenever the transfer floor is binding, fertility choices are inefficient. Second, we show that the usual conditions for efficiency are not sufficient in this context. Third, in contrast to settings with exogenous fertility, a PAYG social security system cannot be used to implement efficient allocations. To achieve an efficient outcome, government transfers need to be tied to fertility choice. Keywords; overlapping generations, fertility, efficiency

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://eprints.soton.ac.uk/169601/1/1020_with_cover.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 1020.

as in new window
Length:
Date of creation: 01 Dec 2010
Date of revision:
Handle: RePEc:stn:sotoec:1020

Contact details of provider:
Postal: Highfield, Southampton SO17 1BJ
Phone: (+44) 23 80592537
Fax: (+44) 23 80593858
Email:
Web page: http://www.economics.soton.ac.uk/
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521806428.
  2. Burbidge, John B, 1983. "Government Debt in an Overlapping-Generations Model with Bequests and Gifts," American Economic Review, American Economic Association, American Economic Association, vol. 73(1), pages 222-27, March.
  3. Drazen, Allan, 1978. "Government Debt, Human Capital, and Bequests in a Life-Cycle Model," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 86(3), pages 505-16, June.
  4. J. Ignacio Conde-Ruiz & Eduardo L. Giménez & Mikel Pérez-Nievas, 2010. "Millian Efficiency with Endogenous Fertility," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 154-187.
  5. Alessandro Cigno & Martin Werding, 2007. "Children and Pensions," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262033690, December.
  6. de la CROIX, David & DOEPKE, Matthias, 2002. "Public versus private education when differential fertility matters," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2002022, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Mikhail Golosov & Larry E Jones & Michèle Tertilt, 2003. "Effciency with Endogenous Population Growth," Levine's Working Paper Archive 666156000000000310, David K. Levine.
  8. Philippe Michel & Bertrand Wigniolle, 2007. "On Efficient Child Making," Economic Theory, Springer, Springer, vol. 31(2), pages 307-326, May.
  9. Becker, Gary S & Barro, Robert J, 1988. "A Reformulation of the Economic Theory of Fertility," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 103(1), pages 1-25, February.
  10. Andrew Abel & Gregory N. Mankiw & Lawrence H. Summers & Richard Zeckhauser, . "Assessing Dynamic Efficiency: Theory and Evidence," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 14-88, Wharton School Rodney L. White Center for Financial Research.
  11. Gary S. Becker & Kevin M. Murphy, . "The Family and the State," University of Chicago - Population Research Center, Chicago - Population Research Center 87-15, Chicago - Population Research Center.
  12. Cigno, Alessandro, 1992. "Children and Pensions," Journal of Population Economics, Springer, Springer, vol. 5(3), pages 175-83, August.
  13. Michele Boldrin & Ana Montes, 2004. "The intergenerational state: education and pensions," Staff Report, Federal Reserve Bank of Minneapolis 336, Federal Reserve Bank of Minneapolis.
  14. 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.
  15. Philippe Michel & Bertrand Wigniolle, 2009. "Pareto-efficiency and endogenous fertility: a simple model," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00306463, HAL.
  16. Ab O, G. & Mahieu, G. & Patxot, C., 2004. "On the optimality of PAYG pension systems in an endogenous fertility setting," Journal of Pension Economics and Finance, Cambridge University Press, Cambridge University Press, vol. 3(01), pages 35-62, March.
  17. S. Rao Aiyagari & Jeremy Greenwood & Ananth Seshadri, 2001. "Efficient Investment in Children," RCER Working Papers 481, University of Rochester - Center for Economic Research (RCER).
  18. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  19. Andrew B. Abel, . "Operative Gift and Bequest Motives," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 09-87, Wharton School Rodney L. White Center for Financial Research.
  20. Cass, David, 1972. "On capital overaccumulation in the aggregative, neoclassical model of economic growth: A complete characterization," Journal of Economic Theory, Elsevier, Elsevier, vol. 4(2), pages 200-223, April.
  21. Michele Boldrin & Mariacristina De Nardi & Larry E. Jones, 2005. "Fertility and Social Security," NBER Working Papers 11146, National Bureau of Economic Research, Inc.
  22. Harford, Jon D, 1998. "The Ultimate Externality," American Economic Review, American Economic Association, American Economic Association, vol. 88(1), pages 260-65, March.
  23. Neil Bruce & Michael Waldman, 1986. "The Rotten-Kid Theorem Meets the Samaritan's Dilemma," UCLA Economics Working Papers, UCLA Department of Economics 402, UCLA Department of Economics.
  24. Cigno, Alessandro, 1983. "On Optimal Family Allowances," Oxford Economic Papers, Oxford University Press, vol. 35(1), pages 13-22, March.
  25. DE LA CROIX, David & DOEPKE, Matthias, 2001. "Inequality and Growth : Why Differential Fertility Matters," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2001008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  26. Alvarez, Fernando & Stokey, Nancy L., 1998. "Dynamic Programming with Homogeneous Functions," Journal of Economic Theory, Elsevier, Elsevier, vol. 82(1), pages 167-189, September.
  27. Barro, R.J. & Becker, G.S., 1988. "Fertility Choice In A Model Of Economic Growth," University of Chicago - Economics Research Center, Chicago - Economics Research Center 88-8, Chicago - Economics Research Center.
  28. Pazner, Elisha A. & Razin, Assaf, 1980. "Competitive efficiency in an overlapping-generation model with endogenous population," Journal of Public Economics, Elsevier, Elsevier, vol. 13(2), pages 249-258, April.
  29. repec:hal:journl:halshs-00306463 is not listed on IDEAS
  30. David, DE LA CROIX & Axel, GOSSERIES, 2006. "Population Policy through Tradable Procreation Entitlements," Discussion Papers (ECON - Département des Sciences Economiques), Université catholique de Louvain, Département des Sciences Economiques 2006040, Université catholique de Louvain, Département des Sciences Economiques.
  31. Michele Tertilt, 2010. "Who Owns Children and Does it Matter?," Discussion Papers, Stanford Institute for Economic Policy Research 09-003, Stanford Institute for Economic Policy Research.
  32. Zeng, J & Jie Zhang, . "Optimal social security in a dynastic model with investment externalities and endogenous fertility," MRG Discussion Paper Series, School of Economics, University of Queensland, Australia 1006, School of Economics, University of Queensland, Australia.
  33. Fernández, Raquel & Rogerson, Richard, 2000. "Sorting and Long-Run Inequality," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2352, C.E.P.R. Discussion Papers.
  34. Edward Lazear, 1983. "Intergenerational Externalities," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 16(2), pages 212-28, May.
  35. Eckstein, Zvi & Wolpin, Kenneth I., 1985. "Endogenous fertility and optimal population size," Journal of Public Economics, Elsevier, Elsevier, vol. 27(1), pages 93-106, June.
  36. Burbidge, John B, 1984. "Government Debt: Reply [Government Debt in an Overlapping-Generations Model with Bequests and Gifts]," American Economic Review, American Economic Association, American Economic Association, vol. 74(4), pages 766-67, September.
  37. Carmichael, Jeffrey, 1982. "On Barro's Theorem of Debt Neutrality: The Irrelevance of Net Wealth," American Economic Review, American Economic Association, American Economic Association, vol. 72(1), pages 202-13, March.
  38. Razin, Assaf & Ben-Zion, Uri, 1975. "An Intergenerational Model of Population Growth," American Economic Review, American Economic Association, American Economic Association, vol. 65(5), pages 923-33, December.
  39. Balasko, Yves & Shell, Karl, 1980. "The overlapping-generations model, I: The case of pure exchange without money," Journal of Economic Theory, Elsevier, Elsevier, vol. 23(3), pages 281-306, December.
  40. Günther Lang, 2005. "Endogenous fertility and modified Pareto-optimality," Portuguese Economic Journal, Springer, Springer, vol. 4(3), pages 171-191, December.
  41. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1986. "Endogenous Population with Public Goods and Malthusian Fixed Resources: Efficiency or Market Failure," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(3), pages 601-09, October.
  42. Laitner, John, 1988. "Bequests, Gifts, and Social Security," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 55(2), pages 275-99, April.
  43. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 66, pages 467.
  44. Cigno, Alessandro, 1983. "Corrigendum [On Optimal Family Allowances]," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 329, July.
  45. repec:hal:journl:halshs-00185259 is not listed on IDEAS
  46. Fernando Alvarez, 1999. "Social Mobility: The Barro-Becker Children Meet the Laitner-Loury Dynasties," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 65-103, January.
  47. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1984. "Bequests and the Size of Population When Population Is Endogenous," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 92(3), pages 527-31, June.
  48. Cigno, Alessandro, 1986. "Fertility and the Tax-Benefit System: A Reconsideration of the Theory of Family Taxation," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 96(384), pages 1035-51, December.
  49. Larry E. Jones & Alice Schoonbroodt, 2007. "Complements versus Substitutes and Trends in Fertility Choice in Dynastic Models," NBER Working Papers 13680, National Bureau of Economic Research, Inc.
  50. Pitchford, J D, 1985. "External Effects of Population Growth," Oxford Economic Papers, Oxford University Press, vol. 37(2), pages 264-81, June.
  51. C. Simon Fan & Oded Stark, 2008. "Looking At The "Population Problem" Through The Prism Of Heterogeneity: Welfare And Policy Analyses," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 799-835, 08.
  52. Gary S. Becker, 1960. "An Economic Analysis of Fertility," NBER Chapters, National Bureau of Economic Research, Inc, in: Demographic and Economic Change in Developed Countries, pages 209-240 National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Julio Dávila, 2011. "Optimal population and education," Documents de travail du Centre d'Economie de la Sorbonne, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne 11069, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  2. Alice Schoonbroodt & Larry E. Jones, 2010. "Baby Busts and Baby Booms: The Fertility Response to Shocks in Dynastic Models," 2010 Meeting Papers, Society for Economic Dynamics 144, Society for Economic Dynamics.
  3. Doepke, Matthias, 2013. "Exploitation, Altruism, and Social Welfare: An Economic Exploration," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9509, C.E.P.R. Discussion Papers.
  4. Alice Schoonbroodt, 2012. "Intergenerational Transfers, Living Arrangements and Development," 2012 Meeting Papers, Society for Economic Dynamics 158, Society for Economic Dynamics.
  5. Michèle Tertilt, 2012. "The Research Agenda: Michèle Tertilt on Gender in Macroeconomics," EconomicDynamics Newsletter, Review of Economic Dynamics, Review of Economic Dynamics, vol. 14(1), November.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:stn:sotoec:1020. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Thorn).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.