Aggregate Fertility and Household Savings: A General Equilibrium Analysis using Micro Data

Abhijit Banerjee, Nancy Qian, Xin Meng () and Tommaso Porzio

No 9935, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This study uses micro data and an OLG model to show that general equilibrium forces are critical for understanding the relationship between aggregate fertility and household savings. First, we document that parents perceive children as an important source of old-age support and that in partial equilibrium, increased fertility lowers household savings. Then, we construct an OLG model that parametrically matches the partial equilibrium empirical evidence. Finally, we extend the model to conduct a general equilibrium analysis and show that under standard assumptions and with the parameters implied by the data, general equilibrium forces can substantially offset the partial equilibrium effects. Thus, focusing only on partial equilibrium effects can substantially overstate the effect of a change in aggregate fertility on households savings.

Keywords: Demographic structure; Savings; Fertility (search for similar items in EconPapers)
JEL-codes: J11 J13 O11 O4 (search for similar items in EconPapers)
Date: 2014-04
New Economics Papers: this item is included in nep-dem and nep-dge
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Citations: View citations in EconPapers (46)

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Related works:
Working Paper: Aggregate Fertility and Household Savings: A General Equilibrium Analysis using Micro Data (2014)
Working Paper: Aggregate Fertility and Household Savings: A General Equilibrium Analysis using Micro Data (2014)
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