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

Abhijit Banerjee · Xin Meng · Tommaso Porzio · Nancy Qian

57 citations0/0 files storedNational Bureau of Economic Research

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Financial Literacy, Pension, Retirement Analysis Gender, Labor, and Family Dynamics Economic theories and models

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.

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References

1986Increasing Returns and Long-Run Growth 2000Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond 1993Population Growth and Technological Change: One Million B.C. to 1990 1988A Reformulation of the Economic Theory of Fertility 1983Theory of Fertility Decline.1989Fertility Choice in a Model of Economic Growth 2011The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China 2008Why Are Saving Rates of Urban Households in China Rising?

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