On high fertility rates in developing countries: birth limits, birth taxes, or education subsidies? |
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Authors: | Yuhua Shi Jie Zhang |
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Institution: | (1) Australian Centre for Economic Research on Health, Australian National University, Canberra, Australia;(2) Department of Economics, National University of Singapore, Kent Ridge, Singapore, 117570;(3) School of Economics, University of Queensland, Brisbane, Australia |
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Abstract: | In this paper, we consider two types of population policies observed in practice: birth limits and birth taxes. We find that
both achieve very similar equilibrium solutions if tax revenue finances lump-sum transfers. By reducing fertility and promoting
growth, both birth policies may achieve higher welfare than conventional education subsidies financed by income taxes. A birth
tax for education subsidies can achieve the first-best solution. The welfare gain of the first-best policy may be equivalent
to a massive 10–50% rise in income, depending on the degree of human capital externalities and the elasticity of intertemporal
substitution.
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Keywords: | Fertility Growth Welfare |
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