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Social Security, Saving and Fertility

Mikko Puhakka () and Matti Viren ()
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Mikko Puhakka: Department of Economics, University of Oulu
Matti Viren: Department of Economics and the Public Choice Research Centre, University of Turku and Bank of Finland

Finnish Economic Papers, 2012, vol. 25, issue 1, 28-42

Abstract: We investigate the effect of government policies on fertility in a model where children are mainly seen as investment goods. To illustrate this effect we construct a simple overlapping generations economy in which households (parents) can invest both in children and financial assets. An introduction of the public social security system lowers the incentive to have children, i.e. fertility will be lower. This is an important negative externality. We test some of the model’s basic implications using unique long historical panel data from 11 countries for the period 1750–2000. In addition, we use two additional, more recent, data sets to reinforce the empirical results obtained with historical data. These analyses show that there is a positive relationship between ageing and fertility if we control for the key determinants of fertility. By contrast, there is a strong negative relationship between (various indicators of) social security and fertility. Empirical evidence is found for the notion that child support increases fertility.

JEL-codes: E21 E32 (search for similar items in EconPapers)
Date: 2012
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