Saving, fertility and public policy in an overlapping generations small open economy

Luca Spataro, Luciano Fanti and Pier Mario Pacini

Economic Modelling, 2019, vol. 81, issue C, 16-29

Abstract: Motivated by the recent increase of public debt experienced by many developed countries, we develop an OLG model to provide the fiscal policies needed for any public debt level to be sustainable in steady state and the consequences that such policies produce on saving and fertility in a small open economy. Our main finding is that a reduction of public debt (an event currently publicly debated) needs tax adjustments that eventually will be detrimental for both fertility and saving under a low-interest-rate regime (possibly similar to the current world regime), with opposite transitional effects on fertility and saving. On the contrary, the needed fiscal adjustments will eventually increase saving and fertility under a high-interest-rate regime, with opposite transitional effects on fertility and saving. Besides providing clear-cut policy implications, our analysis offers possible testable implications concerning the pattern of fertility, taxes and public debt observed in many developed economies.

Keywords: Overlapping generations; Endogenous fertility; Saving; Small open economy; Public national debt (search for similar items in EconPapers)
JEL-codes: D15 H63 J13 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:81:y:2019:i:c:p:16-29

DOI: 10.1016/j.econmod.2018.12.003

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