A Note on Child Policy and Fertility in an Overlapping Generations Small Open Economy: When the Labour Market Institutions Matter

Abstract

We examine how fertility reacts to the public provision of child allowances in a small open economy with overlapping generations. When the labour market is competitive, we find that a child allowance policy acts as a fertility-enhancing device. In contrast, when the labour market is unionised the child policy may be ineffective.

Longer Life and Higher Fertility in an OLG Economy with Production

“…Moreover, in the next section, we check the robustness of the result that an increase of longevity increases fertility, by introducing a family policy rather widespread in developed countries for fighting against the dramatic fertility drop: a per child cash subsidy policy. 16…”

“…As to the issue of the relationship between pension systems and low fertility in Europe, see, for instance, Cigno and Werding [15]. 16. Child policies have been investigated, although in a different context, for instance, by Fanti and Gori [8,16].…”

“…16. Child policies have been investigated, although in a different context, for instance, by Fanti and Gori [8,16]. 17.…”

Fertility, Union Wage Setting and Social Security System

“…Fanti and Gori (2007) showed that for any given minimum (or union"s) wage value, the child subsidy reduces capital accumulation and increases unemployment, and ultimately decreases demand to bear children in a closed economy. Fanti and Gori (2012) examined the effect of child allowances on fertility in a small open economy, and find that in the context of competitive labor market, it acts as a fertility-enhancing device, while in a unionized market the child policy may be ineffective. But both of them failed to suggest how to increase fertility and decrease unemployment by using child policy.…”