IDEAS home Printed from https://ideas.repec.org/a/bpj/germec/v12y2011i3p351-369.html
   My bibliography  Save this article

The Optimal Level of Debt in an OLG Model with Endogenous Fertility

Author

Listed:
  • Spataro Luca

    (Università di Pisa, Lungarno Antonio Pacinotti, 43, Pisa PI, Italy)

  • Fanti Luciano

    (Università di Pisa, Pisa PI, Italy)

Abstract

In the present work we extend Diamond’s OLG model by allowing for endogenous fertility and look at the consequences of such an extension on the rules for optimal public debt issuing. In particular, we show that the condition according to which the rate of growth of population should be higher than the interest rate is no longer sufficient for obtaining welfare improvements via debt increases and that the level of optimal debt is, ceteris paribus, lower than the one arising with exogenous fertility. Finally, a sensitivity analysis shows that the optimal level of debt is higher the lower the capital share, the higher individuals’ degree of patience, the bigger the child-rearing cost and the lower the preference for children. On policy grounds we argue that debt-tightening policies may be optimal in the long run provided that the cost of rearing children does not increase (or, if anything, does decrease).

Suggested Citation

  • Spataro Luca & Fanti Luciano, 2011. "The Optimal Level of Debt in an OLG Model with Endogenous Fertility," German Economic Review, De Gruyter, vol. 12(3), pages 351-369, August.
    • Handle: RePEc:bpj:germec:v:12:y:2011:i:3:p:351-369
    DOI: 10.1111/j.1468-0475.2011.00534.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1468-0475.2011.00534.x
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1111/j.1468-0475.2011.00534.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mikhail Golosov & Larry E. Jones & Michèle Tertilt, 2007. "Efficiency with Endogenous Population Growth," Econometrica, Econometric Society, vol. 75(4), pages 1039-1071, July.
    2. Zhang, Junsen & Nishimura, Kazuo, 1993. "The old-age security hypothesis revisited," Journal of Development Economics, Elsevier, vol. 41(1), pages 191-202, June.
    3. Pazner, Elisha A. & Razin, Assaf, 1980. "Competitive efficiency in an overlapping-generation model with endogenous population," Journal of Public Economics, Elsevier, vol. 13(2), pages 249-258, April.
    4. Rosati, Furio Camillo, 1996. "Social security in a non-altruistic model with uncertainty and endogenous fertility," Journal of Public Economics, Elsevier, vol. 60(2), pages 283-294, May.
    5. Holger Strulik, 2003. "Mortality, the Trade‐off between Child Quality and Quantity, and Demo‐economic Development," Metroeconomica, Wiley Blackwell, vol. 54(4), pages 499-520, November.
    6. Nishimura, Kazuo & Zhang, Junsen, 1992. "Pay-as-you-go public pensions with endogenous fertility," Journal of Public Economics, Elsevier, vol. 48(2), pages 239-258, July.
    7. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521001151.
    8. Philippe Michel & Bertrand Wigniolle, 2007. "On Efficient Child Making," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(2), pages 307-326, May.
    9. Galor, Oded & Weil, David N, 1996. "The Gender Gap, Fertility, and Growth," American Economic Review, American Economic Association, vol. 86(3), pages 374-387, June.
    10. 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.
    11. Günther Lang, 2005. "Endogenous fertility and modified Pareto-optimality," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 4(3), pages 171-191, December.
    12. Strulik, Holger, 1999. "Demographic Transition, Stagnation, and Demoeconomic Cycles in a Model for the Less Developed Economy," Journal of Macroeconomics, Elsevier, vol. 21(2), pages 397-413, April.
    13. Luciano Fanti & Spataro Luca, 2009. "Fertility and public debt," Discussion Papers 2009/89, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    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


    Cited by:

    1. Gori, Luca & Manfredi, Piero & Sodini, Mauro, 2021. "A Parsimonious Model Of Longevity, Fertility, Hiv Transmission And Development," Macroeconomic Dynamics, Cambridge University Press, vol. 25(5), pages 1155-1174, July.
    2. Thomas Renström & Luca Spataro, 2013. "Population Growth and Technological Change: a Pure Welfarist Approach," CEGAP Working Papers 2013_03, Durham University Business School.
    3. Luciano Fanti & Luca Gori, 2014. "Endogenous fertility, endogenous lifetime and economic growth: the role of child policies," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(2), pages 529-564, April.
    4. Luciano Fanti & Luca Gori, 2012. "Endogenous Lifetime in an Overlapping-Generations Small Open Economy," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 68(2), pages 121-152, June.
    5. Fanti, Luciano & Spataro, Luca, 2013. "On the relationship between fertility and public national debt," Economic Modelling, Elsevier, vol. 33(C), pages 843-849.
    6. Luciano Fanti & Luca Gori, 2013. "Fertility-related pensions and cyclical instability," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1209-1232, July.
    7. Luciano Fanti & Luca Gori, 2014. "An OLG model of growth with longevity: when grandparents take care of grandchildren," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 13(1), pages 39-51, April.
    8. Manuela Gussoni & Andrea Mangani, 2012. "The Impact of Public Funding for Innovation on Firms' R&D Investments: Do R&D Cooperation and Appropriability Matter?," L'industria, Società editrice il Mulino, issue 2, pages 237-254.
    9. Luca Spataro & Luciano Fanti, 2013. "From Malthusian to Modern fertility: When intergenerational transfers matter," Discussion Papers 2013/163, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    10. Luciano Fanti & Luca Gori, 2009. "Endogenous fertility, endogenous lifetime and economic growth: the role of health and child policies," Discussion Papers 2009/91, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    11. Luciano Fanti & Luca Gori, 2008. "PAYG pensions and economic cycles: exogenous versus endogenous fertility," Discussion Papers 2008/75, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    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. Luciano Fanti & Luca Gori, 2014. "Endogenous fertility, endogenous lifetime and economic growth: the role of child policies," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(2), pages 529-564, April.
    3. Luca Spataro & Luciano Fanti, 2013. "From Malthusian to Modern fertility: When intergenerational transfers matter," Discussion Papers 2013/163, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    4. Thomas Baudin, 2011. "Family Policies: What Does the Standard Endogenous Fertility Model Tell Us?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(4), pages 555-593, August.
    5. Luciano Fanti & Luca Gori, 2012. "Public Expenditure on Health and Private Old-Age Insurance in an OLG Growth Model with Endogenous Fertility: Chaotic Dynamics Under Perfect Foresight," Computational Economics, Springer;Society for Computational Economics, vol. 40(4), pages 333-353, December.
    6. Alice Schoonbroodt, 2010. "Who Owns Children and Does It Matter?," Working Papers id:2360, eSocialSciences.
    7. Richard C. Barnett & Joydeep Bhattacharya & Mikko Puhakka, 2018. "Private versus public old-age security," Journal of Population Economics, Springer;European Society for Population Economics, vol. 31(3), pages 703-746, July.
    8. Amol Amol & Monisankar Bishnu & Tridip Ray, 2023. "Pension, possible phaseout, and endogenous fertility in general equilibrium," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 376-406, April.
    9. Fanti, Luciano & Gori, Luca, 2012. "PAYG pensions, tax-cum-subsidy and A-Pareto efficiency," Research in Economics, Elsevier, vol. 66(1), pages 65-71.
    10. J. Ignacio Conde-Ruiz & Eduardo L. Giménez & Mikel Pérez-Nievas, 2010. "Millian Efficiency with Endogenous Fertility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(1), pages 154-187.
    11. Philippe Michel & Bertrand Wigniolle, 2007. "On Efficient Child Making," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(2), pages 307-326, May.
    12. Peter J. Stauvermann & Ronald R. Kumar, 2016. "Sustainability of A Pay-as-you-Go Pension System in A Small Open Economy with Ageing, Human Capital and Endogenous Fertility," Metroeconomica, Wiley Blackwell, vol. 67(1), pages 2-20, February.
    13. Cigno, A., 2016. "Conflict and Cooperation Within the Family, and Between the State and the Family, in the Provision of Old-Age Security," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 609-660, Elsevier.
    14. de la Croix, David & Doepke, Matthias, 2021. "A soul’s view of the optimal population problem," Mathematical Social Sciences, Elsevier, vol. 112(C), pages 98-108.
    15. Yasuoka, Masaya, 2018. "Endogenous Fertility and Pension System," MPRA Paper 86131, University Library of Munich, Germany.
    16. Ishida, Ryo & Oguro, Kazumasa & Takahata, Junichiro, 2015. "Child benefit and fiscal burden in the endogenous fertility setting," Economic Modelling, Elsevier, vol. 44(C), pages 252-265.
    17. Volha Belush & Radim Bohacek, 2009. "Social Security Reform in a Dynastic Life-Cycle Model with Endogenous Fertility," 2009 Meeting Papers 453, Society for Economic Dynamics.
    18. Philippe Michel & Bertrand Wigniolle, 2009. "Pareto-Efficiency and Endogenous Fertility: A Simple Model," Mathematical Population Studies, Taylor & Francis Journals, vol. 16(1), pages 36-59.
    19. Peter J. Stauvermann & Ronald R. Kumar, 2017. "Enhancing growth and welfare through debt-financed education," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 30(1), pages 207-222, January.
    20. Luciano Fanti & Luca Gori, 2013. "Fertility-related pensions and cyclical instability," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1209-1232, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:germec:v:12:y:2011:i:3:p:351-369. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.