Child benefit and fiscal burden in the endogenous fertility setting

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.

Fertility and female wages: A new link via house prices

“…This literature has been extended to show that the substitution e¤ect is weakened if households can substitute paid child care for maternal time (Apps and Rees, 2004;Day, 2004;Martinez and Iza, 2004; following Galor and Weil, 1996). Similarly, government-funded child care allowances unambiguously raise fertility (Yasuoko and Gotto, 2011;Ishida et al, 2015). The purpose of this paper is to explore how fertility responds to rising female relative wages if other cots of child rearing are taken into account.…”