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


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.


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

JEL Classification

D91 J13 J21 



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).


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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

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