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Evaluating welfare and economic effects of raised fertility

Krzysztof Makarski (), Joanna Tyrowicz () and Magda Malec
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Magda Malec: Group for Research in Applied Economics (GRAPE)

No 25, GRAPE Working Papers from GRAPE Group for Research in Applied Economics

Abstract: In the context of the second demographic transition, many countries consider rising fertility through pro-family polices as a potentially viable solution to the fiscal pressure stemming from longevity. However, an increased number of births implies private and immediate costs, whereas the gains are not likely to surface until later and appear via internalizing the public benefits of younger and larger population. Hence, quantification of the net effects remains a challenge. We propose using an overlapping generations model with a rich family structure to quantify the effects of increased birth rates. We analyze the overall macroeconomic and welfare effects as well as the distribution of these effects across cohorts and study the sensitivity of the final effects to the assumed target value and path of increased fertility. We find that fiscal effects are positive but, even in the case of relatively large fertility increase, they are small. The sign and the size of both welfare and fiscal effects depend substantially on the patterns of increased fertility: if increased fertility occurs via lower childlessness, the fiscal effects are smaller and welfare effects are more likely to be negative than in the case of the intensive margin adjustments.

Keywords: fertility; welfare; natalistic policies; overlapping generations model (search for similar items in EconPapers)
JEL-codes: H55 E17 C60 C68 E21 D63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-dge and nep-mac
Date: 2018
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