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Child Benefits and Welfare for Current and Future Generations: Simulation Analyses in an Overlapping-Generations Model With Endogenous Fertility

Author

Listed:
  • Kazumasa Oguro

    (Associate Professor, Institute of Economic Research Hitotsubashi University, Japan)

  • Manabu Shimasawa

    (Senior Researcher, National Institute for Research Advancement, Japan)

  • Junichiro Takahata

    (Assistant Professor, Dokkyo University, Japan)

Abstract

We constructed an overlapping-generations model with endogenous fertility to analyze the effects of child benefits and pensions on the welfare of current and future generations. The following results were obtained. First, in the case without pension and accelerated fiscal reforms, the best policy to improve the welfare of future generations is to finance the provision of child benefits by capital taxation, followed by issuing government debt, consumption taxation (VAT), and wage taxation, in that order. Second, debt reduction coupled with increasing child benefits is preferable to debt reduction alone to reduce public debt for future generations. In particular, coupling increased child benefits and fiscal reform simultaneously stands out as the most desirable option. Third, from the viewpoint of pension reform, maintaining pension benefits by increasing VAT is better than cutting benefits coupled with increasing child benefits for future generations.

Suggested Citation

  • Kazumasa Oguro & Manabu Shimasawa & Junichiro Takahata, 2013. "Child Benefits and Welfare for Current and Future Generations: Simulation Analyses in an Overlapping-Generations Model With Endogenous Fertility," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(4), pages 490-511, April.
  • Handle: RePEc:asi:aeafrj:2013:p:490-511
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    References listed on IDEAS

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    1. Juan Carlos Conesa & Sagiri Kitao & Dirk Krueger, 2009. "Taxing Capital? Not a Bad Idea after All!," American Economic Review, American Economic Association, vol. 99(1), pages 25-48, March.
    2. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
    3. Cremer, Helmuth & Gahvari, Firouz, 1995. "Uncertainty, Optimal Taxation and the Direct versus Indirect Tax Controversy," Economic Journal, Royal Economic Society, vol. 105(432), pages 1165-1179, September.
    4. Edward Whitehouse, 2007. "Pensions Panorama : Retirement-Income Systems in 53 Countries," World Bank Publications, The World Bank, number 7177.
    5. Atkinson, A. B. & Stiglitz, J. E., 1972. "The structure of indirect taxation and economic efficiency," Journal of Public Economics, Elsevier, vol. 1(1), pages 97-119, April.
    6. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
    7. Saez, Emmanuel, 2002. "The desirability of commodity taxation under non-linear income taxation and heterogeneous tastes," Journal of Public Economics, Elsevier, pages 217-230.
    8. Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, pages 59-83.
    9. Kazumasa, Oguro & Junichiro, Takahata & Manabu, Shimasawa, 2009. "Child Benefit and Fiscal Burden: OLG Model with Endogenous Fertility," MPRA Paper 16132, University Library of Munich, Germany.
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