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Optimal family policy in the presence of moral hazard, when the quantity and quality of children are stochastic

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  • Alessandro Cigno
  • Annalisa Luporini

Abstract

We examine the second-best family policy under the assumption that both the number, and the future earning capacities of the children born to a couple are random variables with probability distributions conditional on unobservable parental actions. Potential parents take their decisions without taking into account the e¤ects of these actions on the government?s future tax revenue. The second-best policy provides parents with credit and insurance, and allows them to appropriate the external benefits of their actions.

Suggested Citation

  • Alessandro Cigno & Annalisa Luporini, 2009. "Optimal family policy in the presence of moral hazard, when the quantity and quality of children are stochastic," CHILD Working Papers wp13_09, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
    • Handle: RePEc:wpc:wplist:wp13_09
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    12. Alessandro Cigno & Annalisa Luporini, 2009. "Scholarships or Student Loans? Subsidizing Higher Education in the Presence of Moral Hazard," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(1), pages 55-87, February.
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    15. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2004. "Hidden information problems in the design of family allowances," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(4), pages 645-655, December.
    16. Cigno, Alessandro, 1986. "Fertility and the Tax-Benefit System: A Reconsideration of the Theory of Family Taxation," Economic Journal, Royal Economic Society, vol. 96(384), pages 1035-1051, December.
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    Cited by:

    1. Gilles Le Garrec, 2015. "Increased longevity and social security reform: questioning the optimality of individual accounts when education matters," Journal of Population Economics, Springer;European Society for Population Economics, vol. 28(2), pages 329-352, April.
    2. Marie‐Louise Leroux & Pierre Pestieau & Gregory Ponthiere, 2024. "The optimal design of assisted reproductive technologies policies," Health Economics, John Wiley & Sons, Ltd., vol. 33(7), pages 1454-1479, July.
    3. Pierre Pestieau & Gregory Ponthiere, 2013. "Childbearing Age, Family Allowances, and Social Security," Southern Economic Journal, John Wiley & Sons, vol. 80(2), pages 385-413, October.
    4. Komada, Oliwia, 2024. "Raising America’s future: Search for optimal child-related transfers," Economic Modelling, Elsevier, vol. 138(C).
    5. Tomer Blumkin & Yoram Margalioth & Efraim Sadka, 2015. "The Re-distributive Role of Child Benefits Revisited," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(3), pages 476-501, June.
    6. Alessandro Balestrino, 2015. "Family Taxation, Fertility, and Horizontal Equity," Public Finance Review, , vol. 43(3), pages 402-427, May.
    7. Blumkin, Tomer & Margalioth, Yoram & Sadka, Efraim, 2014. "The Redistributive Role of Child Benefits Revisited," Foerder Institute for Economic Research Working Papers 275798, Tel-Aviv University > Foerder Institute for Economic Research.
    8. Cigno, A., 2016. "Conflict and Cooperation Within the Family, and Between the State and the Family, in the Provision of Old-Age Security," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 609-660, Elsevier.
    9. Peter J. Stauvermann & Frank Wernitz, 2019. "Why Child Allowances Fail to Solve the Pension Problem of Aging Societies," Economies, MDPI, vol. 7(4), pages 1-16, December.
    10. Oliwia Komada, 2023. "Raising America's future: search for optimal child-related transfers," GRAPE Working Papers 84, GRAPE Group for Research in Applied Economics.
    11. Robert Fenge & Lisa Stadler, 2014. "Three Family Policies to Reconcile Fertility and Labor Supply," CESifo Working Paper Series 4922, CESifo.

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    More about this item

    Keywords

    stochastic quantity and quality of children; moral hazard; population externalities; family allowances; scholarships; pensions;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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