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Efficiency and endogenous fertility

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  • Pérez-Nievas, Mikel

    (Departamento de Fundamentos da Análise Económica, Universidade de Santiago de Compostela)

  • Conde-Ruiz, José I.

    (Departamento de Fundamentos del Análisis Económico I (Análisis Económico), Universidad Complutense de Madrid and FEDEA (Fundación de Estudios de Economía Aplicada))

  • Giménez, Eduardo L.

    (Departamento de Fundamentos da Análise Económica, Historia e Institucións Económicas, Universidade de Vigo and RGEA (Research Group in Economic Analysis))

Abstract

This paper explores the properties of the notions of A-efficiency and P-efficiency, proposed by Golosov, Jones and Tertilt (Econometrica, 2007), to evaluate allocations in a general overlapping generations setting in which fertility choices are endogenously selected from a continuum and any two agents of the same generation are identical. First, we show that the properties of A-efficient allocations vary depending on the criterion used to identify potential agents. If one identifies potential agents by their position in their siblings' birth order --as Golosov, Jones and Tertilt do--, then A-efficiency requires that a positive measure of agents use most of their endowment to maximize the utility of the dynasty head, which, in environments with finite horizon altruism, implies that some agents --the youngest in every family-- obtain an arbitrary low income to finance their own consumption and fertility plans. If potential agents are identified by the dates in which they may be born, then A-efficiency reduces to dynastic maximization, which, in environments with finite horizon altruism, drives the economy to a collapse in finite time. To deal with situations, like those arising in economies with finite horizon altruism, in which A-efficiency may be in conflict with individual rights, we propose to evaluate the efficiency of a given allocation with a particular class of specifications of P-efficiency, for which the utility attributed to the unborn depends on the utility obtained by their living siblings. Under certain concavity assumptions on value functions, we also characterize every symmetric, P-efficient allocation as a Millian efficient allocation, that is, as a symmetric allocation that is not A-dominated --with the Birth-Order criterion-- by any other symmetric allocation.

Suggested Citation

  • Pérez-Nievas, Mikel & Conde-Ruiz, José I. & Giménez, Eduardo L., 2019. "Efficiency and endogenous fertility," Theoretical Economics, Econometric Society, vol. 14(2), May.
  • Handle: RePEc:the:publsh:2138
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    1. Robert TAMURA & David CUBERES, 2020. "Equilibrium and A-efficient Fertility with Increasing Returns to Population and Endogenous Mortality," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 86(2), pages 157-182, June.

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    More about this item

    Keywords

    Efficiency; optimal population; endogenous fertility; A-efficiency; P-efficiency; millian efficiency; birth-order criterion; birth-date criterion;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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