Aggregate Fertility and Household Savings: A General Equilibrium Analysis Using Micro Data

67 Pages Posted: 26 May 2014 Last revised: 15 Oct 2022

See all articles by Abhijit V. Banerjee

Abhijit V. Banerjee

Massachusetts Institute of Technology (MIT) - Department of Economics

Xin Meng

Australian National University; IZA Institute of Labor Economics

Tommaso Porzio

Yale University

Nancy Qian

Yale University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 2014

Abstract

This study uses micro data and an overlapping generations (OLG) model to show that general equilibrium (GE) forces are critical for understanding the relationship between aggregate fertility and household savings. First, we document that parents perceive children as an important source of old-age support and that, in partial equilibrium (PE), increased fertility lowers household savings. Then, we construct an OLG model that parametrically matches the PE empirical evidence. Finally, we extend the model to conduct a GE analysis and show that under standard assumptions and with the parameters implied by the data, GE forces can substantially offset the PE effects. Thus, focusing only on the PE can substantially overstate the effect of aggregate fertility on household savings.

Suggested Citation

Banerjee, Abhijit V. and Meng, Xin and Porzio, Tommaso and Qian, Nancy, Aggregate Fertility and Household Savings: A General Equilibrium Analysis Using Micro Data (April 2014). NBER Working Paper No. w20050, Available at SSRN: https://ssrn.com/abstract=2441775

Abhijit V. Banerjee (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-252D
Cambridge, MA 02142
United States
617-253-8855 (Phone)
617-253-6915 (Fax)

Xin Meng

Australian National University ( email )

Research School of Economics
College of Business and Economics
Canberra ACT 0200
Australia
+61 26249 3102 (Phone)

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Tommaso Porzio

Yale University ( email )

New Haven, CT 06520
United States

Nancy Qian

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

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