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Low fertility and long run growth in an economy with a large public sector

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Abstract

There is plenty of evidence that growth has a negative relation to fertility and dependency ratios. Recently it has been suggested that low fertility countries may be caught in a trap that is hard to get out of. One important mechanism in such a trap would be social interaction and its effect on the ideal family size. Such social interaction mechanisms are hard to capture in formal models, therefore we use an agent based simulation model to investigate the issue. In our experimental setup a stable growth and population path is provoked into a fertility trap by rising relative child costs linked to positive growth. Even rather large increases in child benefits are then insufficient to get out of the trap. However, the small number of children temporarily enables the economy to grow faster for several decades. Removing the adaptation of social norms turns out to disarm the trap.

Suggested Citation

  • Zamac, Jovan & Hallberg, Daniel & Lindh, Thomas, 2008. "Low fertility and long run growth in an economy with a large public sector," Arbetsrapport 2008:11, Institute for Futures Studies.
  • Handle: RePEc:hhs:ifswps:2008_011
    Note: ISSN: 1652-120X; ISBN: 978-91-85619-35-1
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    Cited by:

    1. David E. Bloom & Alfonso Sousa-Poza, 2010. "Economic Consequences of Low Fertility in Europe," PGDA Working Papers 5410, Program on the Global Demography of Aging.
    2. Thomas Fent & Belinda Aparicio Diaz & Alexia Fürnkranz-Prskawetz, 2013. "Family policies in the context of low fertility and social structure," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 29(37), pages 963-998, November.

    More about this item

    Keywords

    low fertility trap; social norms relative income; economic growth;

    JEL classification:

    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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