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Socially Optimal Child-Related Transfers and Personal Income Tax with Endogenous Fertility

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  • Andras Simonovits

    (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences also Mathematical Institute of Budapest University of Technology and Department of Economics of CEU)

Abstract

To compare the systems of child benefits and of family tax deductions, we create a model with endogenous fertility and basic income, also financed from proportional wage taxes. Pensioners are neglected but younger and older workers are distinguished: the former raise children and receive child benefits, while the latter not. Through the balance equation, current average fertility depends on past average fertility. To have a socially optimal positive child benefit, past average fertility has to be less than 1. The deduction's efficiency is presumably lower than the benefit's and may even be lower than that of pure basic income.

Suggested Citation

  • Andras Simonovits, 2015. "Socially Optimal Child-Related Transfers and Personal Income Tax with Endogenous Fertility," CERS-IE WORKING PAPERS 1537, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:discpr:1537
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    References listed on IDEAS

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    More about this item

    Keywords

    progressive income tax; child benefits; family tax deductions; endogenous fertility;
    All these keywords.

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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