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Family policies : what does the standard endogenous fertility model tell us ?

  • BAUDIN, Thomas

    (Université catholique de Louvain, CORE and IRES, B-1348 Louvain-la-Neuve, Belgium)

Very few studies have explored the optimality properties of the "standard model" of fertility where parents must determine their optimal trade-off between quality and quantity. The present paper works to fill that gap and find three main results. First, when there exist positive externalities in the accumulation of human capital, it is optimal to subsidize education and to tax births. Second, when the Social Welfare Function does not consist of the average utility, the social returns on educational in- vestments can be weaker than the private returns when the optimal population growth rate is negative. In this case, the optimal economic policy consists in subsidizing births and taxing education. Finally, when the health expenditure is introduced as another source of positive externalities, it can be optimal to tax the parental health expenditure to decentralize the first-best path even if this expenditure is always too low at the laissez-faire equilibrium.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2010058.

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Date of creation: 01 Oct 2010
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Handle: RePEc:cor:louvco:2010058
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