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Child Benefit and Fiscal Burden in the Endogenous Fertility Setting

Author

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  • Ishida, Ryo
  • Oguro, Kazumasa
  • Takahata, Junichiro

Abstract

This paper analyzes the possibility of improving the efficiency of child benefit programs in an overlapping generations economy that has endogenous fertility and large government debt levels. We derive the conditions for this improvement using Representative-Consumer and Children-for-Representative-Consumers efficiency criteria in the endogenous fertility setting, as proposed by Michel and Wigniolle (2007). We find that the result crucially depends on the relative amount of accumulated government debt in the economy. When the elasticity of interest rates to child benefit is close to zero and there exists a huge amount of accumulated debt in the economy, financing child benefit programs by issuing debt and using lump-sum tax leads to RC-improvements. This finding is likely to hold in the economies of developed countries that have low fertility rates. We finally provide the implications of these findings on the real economy.

Suggested Citation

  • Ishida, Ryo & Oguro, Kazumasa & Takahata, Junichiro, 2012. "Child Benefit and Fiscal Burden in the Endogenous Fertility Setting," CIS Discussion paper series 533, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:cisdps:533
    Note: The views expressed in this material are those of the authors and do not necessarily reflect the views of JICA, the Ministry of Finance in Japan, or the Policy Research Institute.
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    References listed on IDEAS

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    6. J. Ignacio Conde-Ruiz & Eduardo L. Giménez & Mikel Pérez-Nievas, 2010. "Millian Efficiency with Endogenous Fertility," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 154-187.
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    Cited by:

    1. Hagiwara, Reona, 2020. "Seigniorage and Japanese fiscal sustainability: Simulation analysis using an overlapping generations model," Economic Modelling, Elsevier, vol. 84(C), pages 340-356.
    2. Day, Creina & Guest, Ross, 2016. "Fertility and female wages: A new link via house prices," Economic Modelling, Elsevier, vol. 53(C), pages 121-132.
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    4. Spataro, Luca & Fanti, Luciano & Pacini, Pier Mario, 2019. "Saving, fertility and public policy in an overlapping generations small open economy," Economic Modelling, Elsevier, vol. 81(C), pages 16-29.
    5. Wang, Ruiting & Xu, Gang, 2020. "Can child allowances improve fertility in a gender discrimination economy?," Economic Modelling, Elsevier, vol. 93(C), pages 162-174.

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    More about this item

    Keywords

    Endogenous fertility; Pareto-efficiency; child benefit; fiscal burden;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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