Old-age support policy and fertility with strategic bequest motives

Akira Yakita

Journal of Population Economics, 2024, vol. 37, issue 2, No 11, 23 pages

Abstract: Abstract This paper presents an analysis of the effects of public old-age support on individuals’ fertility decisions and on the long-term equilibrium in an overlapping generation economy with strategic bequest motives. Parents must pay their adult children at least the reservation wage to receive informal old-age support from them (individual rationality constraint). Formal old-age support is financed through wage taxes on children. The increased present value of formal old-age support tends to increase old-age utility, thereby decreasing the family support demand and decreasing savings for the old age. The increased wage tax reduces the opportunity cost of child-rearing time, thereby increasing the fertility rate. The effects of increased formal old-age support on per-worker capital and labor are indeterminate, as is the effect on the long-term lifetime utility of individuals. A strategic bequest motive might engender a higher fertility rate than that of the social optimum.

Keywords: Fertility; Individual rationality constraint; Old-age support; Strategic bequest motives (search for similar items in EconPapers)
JEL-codes: J13 J14 J22 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s00148-024-01024-9

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