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Social Security, Saving and Fertility

  • Mikko Puhakka

    ()

    (Department of Economics, University of Oulu)

  • Matti Viren

    ()

    (Department of Economics and the Public Choice Research Centre, University of Turku and Bank of Finland)

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    We investigate the effect of government policies on fertility in a model where children are mainly seen as investment goods. To illustrate this effect we construct a simple overlapping generations economy in which households (parents) can invest both in children and financial assets. An introduction of the public social security system lowers the incentive to have children, i.e. fertility will be lower. This is an important negative externality. We test some of the model’s basic implications using unique long historical panel data from 11 countries for the period 1750–2000. In addition, we use two additional, more recent, data sets to reinforce the empirical results obtained with historical data. These analyses show that there is a positive relationship between ageing and fertility if we control for the key determinants of fertility. By contrast, there is a strong negative relationship between (various indicators of) social security and fertility. Empirical evidence is found for the notion that child support increases fertility.

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    File URL: http://taloustieteellinenyhdistys.fi/images/stories/fep/fep12012/fep12012_puhakka_and_viren.pdf
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    Article provided by Finnish Economic Association in its journal Finnish Economic Papers.

    Volume (Year): 25 (2012)
    Issue (Month): 1 (Spring)
    Pages: 28-42

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    Handle: RePEc:fep:journl:v:25:y:2012:i:1:p:28-42
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    1. Michele Boldrin & Maria Cristina De Nardi & Larry E. Jones, 2005. "Fertility and Social Security," Levine's Bibliography 666156000000000506, UCLA Department of Economics.
    2. LEROUX, Marie-Louise & PESTIEAU, Pierre, 2011. "Social security and family support," CORE Discussion Papers 2011045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Billari, Francesco C. & Galasso, Vincenzo, 2008. "What Explains Fertility? Evidence from Italian Pension Reforms," CEPR Discussion Papers 7014, C.E.P.R. Discussion Papers.
    4. Ehrlich, Isaac & Lui, Francis T, 1991. "Intergenerational Trade, Longevity, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1029-59, October.
    5. Alessandro Cigno, 2006. "A constitutional theory of the family," Journal of Population Economics, Springer, vol. 19(2), pages 259-283, June.
    6. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
    7. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1335-1357, July.
    8. Cigno, Alessandro, 1993. "Intergenerational transfers without altruism : Family, market and state," European Journal of Political Economy, Elsevier, vol. 9(4), pages 505-518, November.
    9. Galasso, Vincenzo & Gatti, Roberta & Profeta, Paola, 2008. "Investing for the old age : pensions, children and savings," Social Protection Discussion Papers 47101, The World Bank.
    10. Michele Boldrin & Larry E. Jones, 2002. "Mortality, Fertility, and Saving in a Malthusian Economy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(4), pages 775-814, October.
    11. 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.
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