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Low fertility and long run growth in an economy with a large public sector

Jovan Zamac (), Daniel Hallberg and Thomas Lindh

No 2009:5, CAFO Working Papers from Linnaeus University, Centre for Labour Market Policy Research (CAFO), School of Business and Economics

Abstract: Recently it has been suggested that low fertility countries may be caught in a trap that is hard to get out of. One important mechanism in such a trap would be social interaction and its effect on the ideal family size. Such social interaction mechanisms are hard to capture in formal models, therefore we use an agent based simulation model to investigate the issue. In our experimental setup a stable growth and population path is calibrated to Swedish data and using the Swedish social policy setup. The model is provoked into a fertility trap by increasing relative child costs linked to positive growth. Even rather large increases in child benefits are then insufficient to get out of the trap. However, the small number of children temporarily enables the economy to grow faster for several decades. Removing the adaptation of social norms turns out to disarm the trap.

Keywords: Low fertility trap; Social norms relative income; Economic growth (search for similar items in EconPapers)
JEL-codes: J13 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fdg and nep-soc
Date: 2008-12-07
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