Advertisement

Journal of Population Economics

, Volume 22, Issue 3, pp 565–583 | Cite as

Fertility, child care outside the home, and pay-as-you-go social security

  • Makoto Hirazawa
  • Akira YakitaEmail author
OriginalPaper

Abstract

We examine the long-run effects of the pay-as-you-go (PAYG) social security scheme on fertility and welfare of individuals in an overlapping generations model, assuming that child-care services are available in the market. We show that the impact of a tax increase on fertility depends on the relative magnitudes of the standard intergenerational redistribution effect through the social security system, the (implicit) subsidy effect through tax-exemption of child rearing at home, and the price effect through changes in the relative price of market child care, and that if parental child-rearing time is inelastic, a tax cut could bring about a Pareto-improving allocation.

Keywords

Fertility Child care outside the home Pay-as-you-go social security 

JEL Classification

D91 J13 J21 

Notes

Acknowledgments

The authors wish to thank Murray C. Kemp and seminar participants at the Nagoya Macroeconomics Workshop for their comments. They are also indebted to two anonymous referees and to the editor, Alessandro Cigno, for their helpful comments and suggestions. This research is financially supported by the Postal Life Insurance Foundation of Japan. The second author also acknowledges financial support from the Japan Society for the Promotion of Science (Grant no. 18530127).

References

  1. Ahn N, Mira P (2002) A note on the changing relationship between fertility and female employment rates in developed countries. J Popul Econ 15:667–682CrossRefGoogle Scholar
  2. Apps P, Rees R (2004) Fertility, taxation and family policy. Scand J Econ 106:745–763CrossRefGoogle Scholar
  3. Balestrino A, Cigno A, Pettini A (2002) Endogenous fertility and the design of family taxation. Int Tax Public Financ 9:175–193CrossRefGoogle Scholar
  4. Balestrino A, Cigno A, Pettini A (2003) Doing wonders with an egg: optimal re-distribution when households differ in market and non-market abilities. J Public Econ Theory 5:479–498CrossRefGoogle Scholar
  5. Becker GS (1965) A theory of the allocation of time. Econ J 75:493–517CrossRefGoogle Scholar
  6. Blau D, Robins PK (1988) Child-care costs and family labor supply. Rev Econ Stat 70:374–381CrossRefGoogle Scholar
  7. Breyer F (1989) On the intergenerational Pareto efficiency of pay-as-you-go financed pension systems. J Inst Theor Econ 145:643–658Google Scholar
  8. Breyer F, Straub M (1993) Welfare effects of unfunded pension systems when labor supply is endogenous. J Public Econ 50:77–91CrossRefGoogle Scholar
  9. Cigno A (1993) Intergenerational transfers without altruism: family, market and state. Eur J Polit Econ 9:505–518CrossRefGoogle Scholar
  10. Eckstein Z, Wolpin KI (1985) Endogenous fertility and optimal population size. J Public Econ 27:93–106CrossRefGoogle Scholar
  11. Galor O, Weil DN (1996) The gender gap, fertility and growth. Am Econ Rev 86:374–387Google Scholar
  12. Groezen B van, Leers T, Meijdam L (2003) Social security and endogenous fertility: pensions and child allowances as Siamese twins. J Public Econ 87:233–251CrossRefGoogle Scholar
  13. Kögel T (2004) Did the association between fertility and female employment within OECD countries really change its sign? J Popul Econ 17:45–65CrossRefGoogle Scholar
  14. Martinez DF, Iza A (2004) Skill premium effects on fertility and female labor force supply. J Popul Econ 17:1–16CrossRefGoogle Scholar
  15. Rindfuss R, Guzzo KB, Morgan SP (2003) The changing institutional context of low fertility. Popul Res Policy Rev 22:411–438CrossRefGoogle Scholar
  16. Sinn HW (1998) The pay-as-you-go pension system as fertility insurance and an enforcement device. J Public Econ 88:1335–1357CrossRefGoogle Scholar
  17. Yakita A (2001) Uncertain lifetime, fertility and social security. J Popul Econ 14:635–640CrossRefGoogle Scholar
  18. Zhang J, Zhang J, Lee R (2001) Mortality decline and long-run economic growth. J Public Econ 80:485–507CrossRefGoogle Scholar

Copyright information

© Springer-Verlag 2007

Authors and Affiliations

  1. 1.Graduate School of EconomicsChukyo UniversityNagoyaJapan
  2. 2.Graduate School of Systems and Information EngineeringUniversity of TsukubaTsukubaJapan

Personalised recommendations