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

77 Pages Posted: 2 Jun 2014

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 OLG model to show that general equilibrium 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, increased fertility lowers household savings. Then, we construct an OLG model that parametrically matches the partial equilibrium empirical evidence. Finally, we extend the model to conduct a general equilibrium analysis and show that under standard assumptions and with the parameters implied by the data, general equilibrium forces can substantially offset the partial equilibrium effects. Thus, focusing only on partial equilibrium effects can substantially overstate the effect of a change in aggregate fertility on households savings.

Keywords: Demographic Structure, fertility, Savings

JEL Classification: J11, J13, O11, O4

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). CEPR Discussion Paper No. DP9935, Available at SSRN: https://ssrn.com/abstract=2444958

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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