On Efficient Child Making

Abstract

International audienceThis paper is devoted to the study of the Pareto-efficiency of the competitive equilibrium for an overlapping generations economy with endogenous fertility. Pareto-efficiency needs a reformulation when fertility is endogenous. Then it is proved that a competitive equilibrium that converges in over-accumulation is non-Pareto-efficient. However, we provide an example in which a competitive equilibrium that converges in under-accumulation is non-Pareto-efficient. Finally, we give a general condition that ensures the Pareto-efficiency of the competitive equilibrium

Child benefit and fiscal burden in the endogenous fertility setting

“…This implies that certain policies may improve one generation's welfare without making another worse off, even when it is in an under-accumulation state near the steady state. Moreover, Michel and Wigniolle (2007) confirm that the Representative-Consumer efficient ) condition, which is a concept developed in their study, is deeply connected with the sign-of-inequality relationship between child-rearing cost and wage rate. In other words, if certain policies influence this relationship, they may be able to improve RC-efficiency.…”

“…In other words, if certain policies influence this relationship, they may be able to improve RC-efficiency. Michel and Wigniolle (2007) also prove that using an OLG model that has endogenous population growth might improve RC-efficiency in the case of a state of under-accumulation.…”

“…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.…”

“…, an inter-temporal equilibrium is characterized by the sequence Michel and Wigniolle (2007). Hence, an inter-temporal equilibrium is characterized by a…”

“…Building on these studies, Michel and Wigniolle (2007) 4 point out the possibility that under-accumulation may not be efficient in an endogenous fertility setting. This implies that certain policies may improve one generation's welfare without making another worse off, even when it is in an under-accumulation state near the steady state.…”