Fertility child care outside the home and payas

Authors: Makoto Hirazawa Akira Yakita

Publish Date: 2007/06/13

Volume: 22, Issue: 3, Pages: 565-583

PDF Link

Abstract

We examine the longrun effects of the payasyougo PAYG social security scheme on fertility and welfare of individuals in an overlapping generations model assuming that childcare 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 taxexemption of child rearing at home and the price effect through changes in the relative price of market child care and that if parental childrearing time is inelastic a tax cut could bring about a Paretoimproving allocationThe 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 18530127We show a numerical example assuming parameter values of the model as follows beta = 03quad theta = 30quad gamma = 01quad rho = 03left approx left 1 + 005 right 24 rightquad r = 2033left approx left 1 + 003 right24 right and w = 15

Keywords: