The Macroeconomic Impact of Fertility Changes in an Aging Population

53 Pages Posted: 10 Aug 2017

See all articles by Neha Bairoliya

Neha Bairoliya

Harvard University

Ray Miller

Harvard University

Akshar Saxena

Harvard University - T.H. Chan School of Public Health

Date Written: July 25, 2017

Abstract

We assess the impact of continued low fertility in China, versus a rebound in fertility due to the relaxation of the one child policy, on demographic and macroeconomic outcomes in a dynamic general equilibrium framework. We use a rich model of human capital investment, public health insurance, pensions, private savings, and intra-family transfers to support the consumption of young and elderly dependents. We find that in short run (sixty years in our benchmark experiment), income per capita is lower with a fertility rebound due primarily to a higher youth dependency rate. In the long run, higher fertility leads to a reduction in the old-age dependency ratio and lowers the tax rate required to pay for old-age pensions and health care. However income per capita remains lower even in the long run because of a reduction in female labor supply, savings, and schooling. Higher fertility in China is therefore unlikely to offset the negative macroeconomic effects of population aging.

Keywords: China, health, aging, fertility, human capital

JEL Classification: E62, H55, I13, J11, J13

Suggested Citation

Bairoliya, Neha and Miller, Ray and Saxena, Akshar, The Macroeconomic Impact of Fertility Changes in an Aging Population (July 25, 2017). Available at SSRN: https://ssrn.com/abstract=3016158 or http://dx.doi.org/10.2139/ssrn.3016158

Neha Bairoliya (Contact Author)

Harvard University ( email )

9 Bow St
Cambridge, MA 02138
United States

HOME PAGE: http://scholar.harvard.edu/nbairoliya

Ray Miller

Harvard University ( email )

9 Bow St
02138, MA 02138
United States

Akshar Saxena

Harvard University - T.H. Chan School of Public Health ( email )

677 Huntington Avenue
Boston, MA MA 02115
United States

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