A Study on Financial Deficit and Declining Birthrate — From the Viewpoint of “Children as a Social Security Revenue Source” —-

Kazumasa, Oguro and Shoichiro, Yuyama (2008): A Study on Financial Deficit and Declining Birthrate — From the Viewpoint of “Children as a Social Security Revenue Source” —-. Published in: Financial Review , Vol. No.88, (July 2008)

Abstract

While social security systems in the developed countries including Japan are taking pay-as-you-go system based on the cooperation between generations, the fertility number as a tax base of social security is decreasing and the low fertility tendency is common in the developed countries. And if each generation behaves with considering life-cycle and chooses the fertility level rationally, it is considered that there is a possibility that the existence of coverage for social security by fiscal deficit may affect the fertility to some extent. Hence, in this paper, if regarding children as a tax base of social security, we consider the following analysis; 1) from a macro viewpoint, by constructing a dynamic overlapping generation model, how the coverage for social security by fiscal deficit affects on fertility, 2) from a micro viewpoint, in case that there is no relationship between social security transfer and fertility of each household, how the fertility number in the whole economy affects. As a result, to 1), we get an implication that there is a possibility fiscal deficit may affect negatively on fertility from the time series analysis with using 17 countries panel data. Moreover, to 2), from a micro viewpoint, by simplified Nash equilibrium game, in case that there is no relationship between social security benefit and fertility number, there is a negative impact as compared to a social optimal fertility level. In this paper, it is shown that, if children are regarded as a tax base, in order to avoid the negative relationship, it is necessary to consider the following policies; 1) the coverage for social security by fiscal deficit should be set to zero, 2) and a system such that the payment schedule is depending on the number of household children should be introduced, considering the balance of benefit and burden.

• Item Type: MPRA Paper
• Language: English
• Keywords: Finacial deficit: endogenous fertility: child investment: social security system
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H4 - Publicly Provided Goods; J - Labor and Demographic Economics > J1 - Demographic Economics > J13 - Fertility ; Family Planning ; Child Care ; Children ; Youth; H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; J - Labor and Demographic Economics > J1 - Demographic Economics

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