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Has Social Security Influenced Family Formation and Fertility in OECD Countries? An Economic and Econometric Analysis

  • Isaac Ehrlich
  • Jinyoung Kim

There is growing concern about a decline in the total fertility rate worldwide, but nowhere is the concern greater than in OECD countries, some of which already face the prospect of population decline as well. While the trend is largely the result of structural economic and social changes, our paper indicates that it is partly influenced by the scale of the defined-benefits, pay-as-you-go (PAYG) social security systems operating in most countries. Through a dynamic, overlapping-generations model where the generations are linked by parental altruism, we show analytically that social security tax and benefit rates generate incentives for individuals to reduce not just the fertility rate within families, but also the incentive to form families, which we capture empirically by the fraction of adults married. We conduct calibrated simulations as well as regression analyses that measure the quantitative importance of social security tax rates in lowering both net marriage and total fertility rates. Our results show that the impact of social security on these variables has been non-trivial. Our calibrated simulations also enable us to study the effects of changes in the structure of social security on family formation and fertility.

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File URL: http://www.nber.org/papers/w12869.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12869.

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Date of creation: Jan 2007
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Publication status: published as "Has Social Security influenced family formation and fertility in OECD countries? An economic and econometric analysis", Isaac Ehrlich and Jinyoung Kim, Journal of Pharmaceuticals Policy and Law, Vol. 9, 2007, pp. 99-120.
Handle: RePEc:nbr:nberwo:12869
Note: HE PE LS AG
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  1. Robert J Barro & Jong-Wha Lee, 2003. "IMF Programs: Who Is Chosen and What Are the Effects?," Departmental Working Papers 2003-09, The Australian National University, Arndt-Corden Department of Economics.
  2. Juster, F. Thomas & Stafford, Frank P., 1990. "The Allocation of Time: Empirical Findings, Behavioural Models, and Problems of Measurement," Working Paper Series 258, Research Institute of Industrial Economics.
  3. Isaac Ehrlich & Jinyoung Kim, 2007. "Social Security and Demographic Trends: Theory and Evidence from the International Experience," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(1), pages 55-77, January.
  4. Ehrlich, Isaac & Zhong, Jian-Guo, 1998. "Social Security and the Real Economy: An Inquiry into Some Neglected Issues," American Economic Review, American Economic Association, vol. 88(2), pages 151-57, May.
  5. Isaac Ehrlich & Jinyoung Kim, 2005. "Social Security, Demographic Trends, and Economic Growth: Theory and Evidence from the International Experience," NBER Working Papers 11121, National Bureau of Economic Research, Inc.
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