%0 Journal Article
%T Longer Life and Higher Fertility in an OLG Economy with Production
%A Luciano Fanti
%J International Journal of Population Research
%D 2013
%I Hindawi Publishing Corporation
%R 10.1155/2013/207313
%X This paper investigates the effect of a change in life expectancy (i.e., longevity) on fertility in a standard OLG economy. The main result is that, in contrast with other papers, an increase in the longevity rate may increase the fertility rate as well. It is shown that such a result holds when the cost of rearing children in terms of goods and services (rather than in terms of forgone wages) matters. In particular, such a result depends on the relative ”°strength”± of the capital in the technology as compared with the ”°strength”± of the parsimony. Moreover it is shown, again in contrast with other papers, that with an unfunded social security system it is more likely that a longer life may increase the fertility. The latter result is even more likely in the presence of child subsidy policies, which are widespread in developed countries. In conclusion, we argue that in countries having a population with a high longevity, a high capital share, a large unfunded social security, and child subsidy policies (such as Italy), a further increase of longevity may increase fertility in the long run and thus partially alleviate the peril of the so-called ”°demographic bomb.”± 1. Introduction In the recent years longevity and fertility have been primary policy concerns, especially in the developed countries in which the population aging affects public budget (e.g., pensions and health cares) and labour market. As a consequence, there is a vast recent literature considering the role of longevity in dynamic models. Among the recent papers, De La Croix and Licandro [1] consider the role of rising longevity on schooling decisions in the early stages of life. Zhang et al. [2] consider a model with public education and imperfect annuity markets, where a decline in mortality affects growth. Cipriani and Makris [3] consider the role of expectations of longevity on economic outcomes in an overlapping generations model where longevity of one generation depends on the average human capital level of the same generation. However while De la Croix and Licandro [1] and Zhang et al. [2] assume exogenous longevity and Cipriani and Makris [3] focus on an endogenous mechanism determining longevity, they abstract from the fertility issue and thus from the possible effects of longevity on fertility. The latter issue, although it seems to be crucial for determining the long run population growth, has been investigated by few papers. Among these, the seminal paper by Ehrlich and Lui [4] found that rising longevity promotes growth by rising human capital investment in children and by reducing
%U http://www.hindawi.com/journals/ijpr/2013/207313/