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Child Subsidies And The Cross-Sectional Fertility Pattern

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  • Reijnders, Laurie S. M.

Abstract

This paper studies the effect of different types of child subsidies on the economic allocation and the cross-sectional fertility pattern. I construct a rich but tractable general equilibrium model with overlapping generations of heterogeneous individuals, two sectors of production and a government. I derive analytically how fertility choices are affected by changes in household resources and child subsidies and show the numerical results of two policy experiments. A subsidy on childcare favors the birth rates of educated, high-wage individuals. Parents work more so that the subsidy program is partly financed by a rise in labor earnings. In contrast, a lump-sum child allowance stimulates fertility of uneducated, low-wage parents the most. This policy has a larger effect on the average birth rate, but as parents perform most of the care themselves it comes at the expense of a lower supply of labor and a greater tax burden.

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  • Reijnders, Laurie S. M., 2018. "Child Subsidies And The Cross-Sectional Fertility Pattern," Macroeconomic Dynamics, Cambridge University Press, vol. 22(5), pages 1207-1237, July.
    • Handle: RePEc:cup:macdyn:v:22:y:2018:i:05:p:1207-1237_00
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    Cited by:

    1. Koka, Katerina & Rapallini, Chiara, 2023. "Italy’s demographic trap: Voting for childcare subsidies and fertility outcomes," European Journal of Political Economy, Elsevier, vol. 76(C).

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