Millian Efficiency with Endogenous Fertility

J. Ignacio Conde-Ruiz, Eduardo Giménez and Mikel Pérez-Nievas

No 2004-13, Working Papers from FEDEA

Abstract: This paper studies an extension of the notion of Pareto eciency, referred to as Millian eciency, to evaluate the performance of symmetric allocations in an overlapping generations setting with endogenous fertility. The criterium of Pareto dominance underlying the notion of Millian eciency is based exclusively on preferences of those agents who are actually born, and allows only for welfare comparisons of symmetric allocations (i.e, allocations in which all living individuals of the same generation take the same decisions). The main contributions of the paper are the following. First, we provide necessary (static) and sucient (dynamic) conditions to determine whether an allocation is Millian ecient or not, and we show that the sucient conditions for dynamic eciency oered by Cass (1972) and Balasko and Shell (1980) cannot be straightforward applied when fertility is endogenous. Second, we extend the two Fundamental Theorems of Welfare Economics to a framework with endogenous population by characterizing Millian ecient allocations as the equilibria of a decentralized price mechanism. Finally, we discuss alternative extensions of the Pareto criterium that strengthen the Millian notion.

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Related works:
Journal Article: Millian Efficiency with Endogenous Fertility (2010)
Working Paper: Millian efficiency with endogenous fertility (2007)
Working Paper: Millian Efficiency with Endogenous Fertility (2006)
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