Who owns children and does it matter?
By: Alice Schoonbroodt, Michèle Tertilt.
Contributors: Tertilt, Michèle.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 15663; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 15663.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Is there an economic rationale for pronatalist policies? In this paper we propose and analyze a particular market failure that may lead to inefficiently low equilibrium fertility and therefore to a need for government intervention.  The friction we investigate is related to the ownership of children.  If parents have no claim on their children's income, then the private benefit from producing a child may be smaller than the social benefit.  We present an overlapping-generations (OLG) model with fertility choice and altruism, and model ownership by introducing a minimum constraint on transfers from parents to children.  Using the efficiency concepts proposed in Golosov, Jones, and Tertilt (2007), we find that whenever the transfer floor is binding, fertility choices are inefficient.  We show how this inefficiency relates to dynamic inefficiency in standard OLG models with exogenous fertility and Millian efficiency in models with endogenous fertility.  In particular, we show that the usual conditions for efficiency are no longer sufficient.  Further, we analyze several government policies in this context.  We find that, in contrast to settings with exogenous fertility, a PAYG social security system cannot be used to implement the efficient allocation.  To achieve the efficient outcome, government transfers need to be tied to a person's fertility choice in order to provide incentives for child-bearing"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 2/23/2010.

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