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1 results

  • CHILD SUBSIDIES AND THE CROSS-SECTIONAL FERTILITY PATTERN

  • Laurie S. M. Reijnders
  • Journal:
    Macroeconomic Dynamics / Volume 22 / Issue 5 / July 2018
    Published online by Cambridge University Press:
    26 February 2018, pp. 1207-1237

  • 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.