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Child Benefit and Fiscal Burden: OLG Model with Endogenous Fertility


  • Kazumasa, Oguro
  • Junichiro, Takahata
  • Manabu, Shimasawa


In this paper, we present an OLG simulation model with endogenous fertility in order to analyze the relationship between child benefit and fiscal burden in Japan. Our simulation results show that expansion of the child benefit will improve the welfare of current and future generations. On the other hand, our findings show that we cannot expect a significant long-term improvement in welfare solely from implementing a policy of increasing the consumption tax. If both the sustainability of the fiscal budget and the improvement of the welfare of current and future generations are requirements, we will need to promote a strategy consisting of such components as a policy-mix that includes both child benefit expansion and additional fiscal reform, i.e. increasing the consumption tax. Implementation of such a policy-mix could be expected to yield a higher economic level in the welfare of current and future generations than could be expected solely from consumption tax reform.

Suggested Citation

  • Kazumasa, Oguro & Junichiro, Takahata & Manabu, Shimasawa, 2009. "Child Benefit and Fiscal Burden: OLG Model with Endogenous Fertility," MPRA Paper 16132, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:16132

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    References listed on IDEAS

    1. Mikhail Golosov & Larry E. Jones & Michèle Tertilt, 2007. "Efficiency with Endogenous Population Growth," Econometrica, Econometric Society, vol. 75(4), pages 1039-1071, July.
    2. Andrew B. Abel & N. Gregory Mankiw & Lawrence H. Summers & Richard J. Zeckhauser, 1989. "Assessing Dynamic Efficiency: Theory and Evidence," Review of Economic Studies, Oxford University Press, vol. 56(1), pages 1-19.
    3. Edward Whitehouse, 2007. "Pensions Panorama : Retirement-Income Systems in 53 Countries," World Bank Publications, The World Bank, number 7177, March.
    4. Willis, Robert J, 1973. "A New Approach to the Economic Theory of Fertility Behavior," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 14-64, Part II, .
    5. Nishimura, Kazuo & Zhang, Junsen, 1992. "Pay-as-you-go public pensions with endogenous fertility," Journal of Public Economics, Elsevier, vol. 48(2), pages 239-258, July.
    6. Rupa Chakrabarti, 1999. "Endogenous fertility and growth in a model with old age support," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 13(2), pages 393-416.
    7. Oguro, Kazumasa & Takahata, Junichiro, 2009. "Child Benefit and Fiscal Burden with Endogenous Fertility," MPRA Paper 15378, University Library of Munich, Germany.
    8. Eckstein, Zvi & Wolpin, Kenneth I., 1985. "Endogenous fertility and optimal population size," Journal of Public Economics, Elsevier, vol. 27(1), pages 93-106, June.
    9. Gary S. Becker & Robert J. Barro, 1988. "A Reformulation of the Economic Theory of Fertility," The Quarterly Journal of Economics, Oxford University Press, vol. 103(1), pages 1-25.
    10. Raut, L K & Srinivasan, T N, 1994. "Dynamics of Endogenous Growth," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(5), pages 777-790, August.
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    Cited by:

    1. Mikel Pérez-Nievas & J. Ignacio Conde-Ruiz & Eduardo L. Giménez, 2014. "Efficiency and Endogenous Fertility," Working Papers 2014-10, FEDEA.
    2. Kazumasa Oguro & Manabu Shimasawa & Junichiro Takahata, 2013. "Child Benefits and Welfare for Current and Future Generations: Simulation Analyses in an Overlapping-Generations Model With Endogenous Fertility," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(4), pages 490-511, April.
    3. Kiichi Tokuoka, 2012. "Intergenerational Implications of Fiscal Consolidation in Japan," IMF Working Papers 12/197, International Monetary Fund.
    4. Oliwia Komada, 2015. "Children as a public good in PAYG pension system," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 43.
    5. Akira Okamoto, 2013. "Simulating Public Pension Reforms in an Aging Japan: Welfare Analysis with LSRA Transfers," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 9(4), pages 597-632, September.

    More about this item


    Computable general equilibrium (CGE) model; overlapping generations (OLG); child benefit; endogenous fertility;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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