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Aggregate Fertility and Household Savings: A General Equilibrium Analysis using Micro Data

Author

Listed:
  • Abhijit Banerjee
  • Xin Meng
  • Tommaso Porzio
  • Nancy Qian

Abstract

This study uses micro data and an overlapping generations (OLG) model to show that general equilibrium (GE) forces are critical for understanding the relationship between aggregate fertility and household savings. First, we document that parents perceive children as an important source of old-age support and that, in partial equilibrium (PE), increased fertility lowers household savings. Then, we construct an OLG model that parametrically matches the PE empirical evidence. Finally, we extend the model to conduct a GE analysis and show that under standard assumptions and with the parameters implied by the data, GE forces can substantially offset the PE effects. Thus, focusing only on the PE can substantially overstate the effect of aggregate fertility on household savings.

Suggested Citation

  • Abhijit Banerjee & Xin Meng & Tommaso Porzio & Nancy Qian, 2014. "Aggregate Fertility and Household Savings: A General Equilibrium Analysis using Micro Data," NBER Working Papers 20050, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20050
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    More about this item

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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