Pay-as-you-go financed public pensions in a model of endogenous growth and fertility

Employing an overlapping generations endogenous growth model in which parents derive utility from having children and, additionally, expect children to support them in old age, this paper explores the interrelation between growth, fertility, and the size of pay-as-you-go financed public pensions. It is shown that small sized public pensions stimulate per capita income growth, but further increases in public pensions eventually reduce it. Fertility, on the other hand, falls by an increase in public pensions if they are either small or large. Medium sized public pensions, however, may stimulate fertility. Received: 9 September 1997 / Accepted: 10 April 1998     

Mixing Bismarck and child pension systems: an optimum taxation approach

Pensions with a strong tax–benefit link (Bismarck pensions) minimise the labour–leisure distortion of the public pension system. By contrast, pensions with a strong link of benefits to the number of children (child pensions) minimise the fertility distortion. When both types of distortion are present, we obtain a Corlett–Hague result regarding the optimal mix of the two pension formulae: the Bismack pension should be given a positive weight if and only if children are more complementary to leisure than consumption. Alternative fertility instruments such as child benefits turn out to be perfect substitutes to a child pension.     

Fertility-related pensions and cyclical instability

In this paper, we study a general equilibrium model with overlapping generations, endogenous fertility and public pensions. By assuming Cobb–Douglas technology and logarithmic preferences, we show that the introduction of a fertility-related component in the pay-as-you-go pension scheme may destabilise the long-term equilibrium and cause endogenous fluctuations when individuals have static expectations. The possibility of cyclical instability increases (resp. reduces) when both the subjective discount factor and relative weight of individual fertility in pay-as-you-go pensions (resp. the parents’ taste for children) increase(s). Interestingly, when public pensions are contingent on the individual number of children, the financing of small-sized benefits may cause the occurrence of a flip bifurcation, two-period cycles and cycles of a higher order. In addition, we show through numerical simulations that these results hold in a more general setting with a constant inter-temporal elasticity of substitution utility function and a constant elasticity of substitution production function. Our findings identify a possible novel factor responsible for persistent deterministic fluctuations in a context of overlapping generations, while also representing a policy warning regarding the destabilising effects of fertility-related pension reforms, which are currently high in both the theoretical debate and the political agendas of several developed countries.     

Another Child? Fertility Ideals,Resources and Opportunities

Low fertility in most developed countries has prompted policy concern in relation to labour market supply, pensions, and expenditure on health and welfare services as well as policy debate about both the cost of children and the opportunity costs of parenthood. The extent to which family policy interventions can be effective in slowing or reversing fertility decline is much debated. This paper, based on a fertility module of the Scottish Social Attitudes Survey 2005, examines the current fertility, and ideal and expected fertility of a nationally representative sample of 455 parents of reproductive age and focuses on whether they plan to have another child. It compares the characteristics of those who intend to have another child with those who do not, and how parents with one child differ from those with more children. It addresses three questions about family size: (1) fertility ideals, (2) resources and the economic implications of childbearing, and (3) opportunities for childbearing and the effects of a late start on fertility expectations. It concludes that, despite a sustained period of low fertility in Scotland, childbearing ideals are robust and explanations of low fertility must derive from difficulties in realising those ideals. Difficulties in realising fertility aspirations are associated less with resources than with opportunities for childbearing, especially the timing of first birth. Those who delay their first birth are less likely to realise their ideal family size, and their lower fertility is associated with the opportunity costs of childbearing in terms of foregone qualifications, careers and earnings.     

Rawlsian optimal population size

In this paper, I examine the implications of the Rawlsian maximin criterion for optimal population size and intergenerational allocation of resource when fertility is endogenous. I show that whenever children are better-off than their parents in laissez-faire, then the size of the population and parental bequests are also optimal according to the Rawlsian criterion. Otherwise, laissez-faire leads to overpopulation and suboptimal bequests. I then show that by using proper price-based corrective policies, society can achieve a Rawlsian optimal allocation. These policies involve either a combination of a subsidy to aggregate future consumption and a per-capita tax on children, or a subsidy to average future consumption.For their comments, I thank two anonymous referees. I also thank Assaf Razin and Efraim Sadka for their comments on an earlier draft.     

Comparison and fairness in family planning]

There are two kinds of comparison in family planning (FP) practice. First, people compare the number of children they have with their desired family size. Second, people compare their number of children with other's. The extent of their satisfaction from the comparison often depends on their expectation. And people's expectation about their family size may have an impact on the level of fertility. One task in a FP program is to regulate people's objects for comparison and to reduce the number of children they expect to have. But, changes in people's desired number of children are largely dependent upon the socio economic charges which can not be achieved in short time. Therefore, it would be more advisable to direct people to compare their fertility behavior with those of couples who have only one child, rather than those who have 3 or 4. Satisfaction with family size also comes from a feeling of fairness. People not only look at what they get, but also at what others get. Fairness and justice in FP program implementation is important. If those who violate local birth control policies and regulations are not properly punished, other people would feel that the situation is unfair and they would regret that they did not do the same. The pressure brought by over-population to socio-economic development has been gradually felt by most people. But, it is still difficult to have them strictly observe the present fertility regulation policy. If restrictions of various kinds are enforced and education and publicity are used, people will feel that they are being treated fairly. This will facilitate the promotion of the FP program.     

Costs and benefits of children: implications for population policy

Family size preferences are strongly affected by parents' perceptions of the value, economic contributions, and costs of children. Better understanding of these factors can help policy-makers to improve the effectiveness of population IEC campaigns, design strategies to persuade couples to have smaller families, assess the relationship between economic development and family size preferences, and devise national population policies and family planning programs that reflect individual choices. Parents in high-fertility countries are more likely to perceive children as productive investments than those in low-fertility countries. Parents in the former countries maintain children are an economic advantage or provide practical assistance in the household; they are less likely to emphasize the psychological advantages of children. As economic development occurs, and parents no longer value children for their economic contributions, psychological and social reasons become more important. Changing fertility preferences is more complex than providing couples with family planning services. Similarly, efforts to persuade families that large families are a burden are successful only when families are already interested in reducing their family size. Efforts to persuade couples to have smaller families are likely to be more successful if there are alternative sources of old-age support available, for example, from increased household savings, public or private pensions, or greater contributions from 1st and 2nd children. Investments in education and training, especially for women and children, would also support these goals.     

Taxes and the Family: The impact of the tax exemption for dependents on marital fertility

In this paper I use data from the Panel Study on Income Dynamics to examine the relationship between the dependent exemption feature of the United States federal income tax (an unambiguous subsidy to dependents) and the fertility behavior of married couples over the period 1979-1983. The exemption decreases the price of a child to a household, thus having a direct relationship to the timing and/or number of children observed in a family. Conditional logit results support this hypothesis by showing that the exemption has a positive and significant impact on the likelihood of having a birth during the period under study.     

The effects of child-related benefits and pensions on fertility by birth order: A test on Hungarian data

Using aggregate time-series data from post-war Hungary, we investigated the effect of child-related benefits and pensions on overall fertility and fertility by birth order. The results indicate moderate effects that are robust across a wide range of specifications. According to our estimates, a 1-per-cent increase in child-related benefits would increase total fertility by 0.2 per cent, while the same increase in pensions would decrease fertility by 0.2 per cent. The magnitude of both effects increases by birth order; this is more robust for child-related benefits.     

Bargaining over family size: The determinants of fertility in Brazil

Understanding how households make fertility decisions is important to implementing effective policy to slow population growth. Most empirical studies of this decision are based on household models in which men and women are assumed to act as if they have the same preferences for the number of children. However, if men and women have different preferences regarding fertility and are more likely to assert their own preferences as their bargaining power in the household increases, policies to lower fertility rates may be more effectively targeted toward one spouse or the other. In this paper, we test the relevance of the single preferences model by investigating whether men and women's nonwage incomes have the same effects on the number of children in the household. We find that while increases in both the man and woman's nonwage income lower the number of children in the household, an equivalent increase in the woman's income has a significantly stronger effect than the man's. In addition, we find that increases in women's nonwage transfer income have the strongest effects on the fertility decisions of women with low levels of education. The most important policy implication of our results is that policies aimed at increasing the incomes of the least-educated women will be the most effective in lowering fertility rates.     

The macroeconomics of fertility in small open economies: A test of the Becker-Barro model for The Netherlands and New Zealand

Becker and Barro (1988) formulated a theoretical model which identified a range of macroeconomic variables which can temporarily or permanently affect fertility in small open economies. This article tests the Becker-Barro model with relevant data which covers most of the 20th century for two small open economies, namely The Netherlands and New Zealand. The results show that government subsidies for having children have a strong positive effect on fertility, while the provision of public pensions has a strong negative effect. The degree of intergenerational altruism appears to have been declining. Moreover, there is only weak support for the hypothesis that real interest rates positively influence fertility. Received: 2 March 1998/Accepted: 1 September 1999     

养老保险现收现付制的挤出效应——一个内生生育率模型

文章在一个内生经济增长的OLG模型框架下研究现收现付制养老保险计划的挤出效应。具体考察公共养老金税率变动对家庭的消费与储蓄、生育选择以及经济增长的长期影响。结果表明,存在向上利他动机的情况下,挤出效应的大小取决于养老基金的规模,适度规模的公共养老金计划不会挤出私人储蓄。而有利于消费增加与经济增长;较大规模的公共养老金计划会对私人自愿储蓄与消费产生负面影响,并且对储蓄的挤出作用要大于对消费的挤出。人口老龄化进程在一定程度上缓解挤出效应,促进资本积累与经济增长。     

Books and publications received

Efforts to control rampant population growth in sub-Saharan Africa have been stymied by confusion between the potential causes and consequences of high fertility in the region. A controversy has surfaced over the causal direction of the fundamental relationship between human fertility and size of landholdings. Members of one school of thought claim that farm couples modify their fertility behaviour according to the amount of land they own or operate. Yet others argue that the size of landholdings varies as a function of family size (an indicator of the availability of family labour). In the present study we use a two-stage least-squares regression on data from a 1988 survey of 747 farm households in Rwanda to disaggregate and compare the strengths of these two possible paths of influence. The results show that landholdings exert a positive influence on human reproduction, but not the reverse. Moreover, this influence is slightly stronger for couples who own all the land they operated, probably because they have larger incomes from equity in the land. The size of the farm is unrelated to the size of the family's potential farm labour force (measured as the number of household members aged 15–65) or to the husband's total desired number of children. These findings suggest that farm size boosts the number of living children not by creating a demand for more children but by increasing the supply of children through higher natural fertility and child survival.     

Children as by-products, investment goods and consumer goods: A Review of some micro-economic models of fertility

Summary This paper is a review of a number of applications of traditional micro-economics to the analysis of fertility. In this paper four general models of family size are developed and utilized for classifying previous work on the micro-economic analysis of fertility. The general models describe four family decision-making situations. The outcome of these decisions determines fertility either directly or indirectly. In the first model, parents are forced to choose between sexual activity and a higher standard of living. Children are the by-products of the amount of sexual activity chosen. In the second model, children are an investment good and family size is determined by the choice between current and future consumption. The third and fourth models depict situations in which children are considered to be desirable in themselves, that is, they are consumption goods.     

Demographic aspects of fertility in Thailand

Abstract Data from a national rural and urban sample survey are analysed in order to examine various demographic aspects of fertility in Thailand. Marital fertility rates found for Thailand are among the highest in Asia. Particularly noteworthy is the persistence of high fertility at older ages of childbearing for rural women. Cumulative fertility shows a pronounced relationship with age at marriage and current marital status. Women who marry at an older age or who experience disruption of their marriages are clearly more likely to have fewer children ever born. Differences in both current and cumulative fertility are strongly associated with residence. Rural women who constitute the vast majority of Thai women, experience the highest fertility, Bangkok-Thonburi women experience the lowest fertility and provincial urban women are characterized by an intermediate fertility level which is closer, however, to the experience of their counterparts in the capital than in the countryside. Rural-urban fertility differences are mitigated but by no means eliminated by differences in infant mortality. In both rural and urban areas a positive association between cumulative fertility and infant morality is evident. Breast-feeding, commonly practised for extended periods-among both rural and urban Thai women, undoubtedly serves to some extent as an intervening variable in this relationship. A comparison of current fertility with cumulative fertility strongly suggests that a decline in marital fertility has been under way recently among urban women, especially those residing in the capital, but not at all among rural women. Although it seems safe to assume that the urban fertility decline results in large part from an increasing use of contraception among urban women, those still in the reproductive ages who were using or had previously used birth control were characterized by higher cumulative fertility than women who had never practised contraception. Evidently couples resort to family planning only late in the family building process after they have already achieved or exceeded the number of children they wish to have.     

Rural-urban fertility differentials in Western Nigeria

Abstract The paper attempts to glean some information on differential fertility from data obtained in a survey of selected urban and rural communities in Western Nigeria. The results show that the attitudes of rural women are far more favourable to high fertility than those of urban women, though for both groups the modal number of children preferred is five or six. The analysis also yields a total fertility of nearly six and an average family size of about five for both groups. No conclusive evidence of rural-urban fertility differentials has, however, been found. All that can be said on the basis of the available data is that the level of fertility in Western Nigeria is currently very high and that urban fertility is probably as high as rural fertility, though the probability of much larger errors in the rural than in the urban data may imply somewhat higher rural fertility.     

Fertility and PAYG pensions in the overlapping generations model

This article analyses how long-run pay-as-you-go public pensions react to a change in fertility in the Diamond overlapping generations model. While it might seem well established both in academic and political debates that the decline in fertility represents a “demographic time bomb” for the sustainability of public pensions, it is shown that a falling birth rate need not necessarily cause the fall of pensions in the long run.     

A simple measure of fertility control

We describe a simple measure of fertility control: the proportion of all births from the age-specific fertility schedule that occurs among women by age 35. This measure has broad applicability because it does not require information on marital fertility rates. When both the proportion of births by age 35 and the most commonly used measure of fertility control, m, are calculated for a population over time, they are correlated very highly. Because of increasing levels of nonmarital fertility in several developed countries, measures of fertility control that are based on marital fertility are less appropriate now than in the past.     

Lifetime income redistribution by social security

This paper discusses the redistributive impact of the Dutch social security system on lifetime basis. Net benefits appear to be positive for the birth generations up to 1960. Social insurances show a declining net benefit, whereas for occupational pensions the reverse holds. It is generally assumed that flat-rated social security schemes are more redistributive ones than wage-related schemes. However, the Dutch social security system shows that on a lifetime basis the redistributive impact of flat-rated general insurances does not necessarily largely differ from the wage-related employee insurances. Social assistance schemes result in a very large income redistribution in view of the small amounts involved. Social insurances and social assistance schemes have an income equalizing effect. On the contrary, occupational pensions increase income inequality.The author would like to acknowledge gratefully the funding provided by the Research Program for Population Studies of the Dutch Scientific Organization NWO (grant no. 18.051). Helpful comments from Pierre Pestieau and two anonymous referees are gratefully acknowledged.     

西北农村妇女文化素质对生育水平及生育观念的影响分析——对甘肃中部地区520名农村妇女的调查

本文利用对甘肃中部地区10个贫困县的调查资料,采用SPSS统计方法,就贫困妇女文化程度与生育水平和生育观念的关系进行了实证分析。分析结果表明,妇女文化素质对初婚年龄、初育年龄和活产子女数都有不同程度的影响,且呈现出负相关关系;较高文化素质的妇女在生育目的方面传宗接代和养儿防老观念已经淡薄。生育子女性别仍具有较强的男孩偏好特征,理想子女数少生观念明显,尤其对于子女教育期望有较强的性别平等意识。