The economist: Government trying to stimulate a rise in total fertility rates?

Posted on September 20, 2010 by

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On Sept. 16th, 2010, The economist published an article entitled: an excercise in fertility In Asia’s “little tigers”, big families went out of vogue decades ago, and have stayed there Whose to blame for the decline in fertility rates in the rich economies of south east Asia?

It is true that as income grows, the opportunity cost of having children increases therefore reducing the incentive to have children, but what if what economists call the income effect was not the only culprit for the massive decline in fertility rates? What if a longstanding history of bad government policy had in effect contributed to this massive decline in fertility? Among many other bad policies, most pension systems in the developed countries (social security system) subsidize retirement and reduce the incentive for individuals to have children because individuals don’t need to invest in children, to care for them in old age.

Even worse, what if now an attempt to increase fertility rates made matters worse?  Subsidizing fertility or child rearing could greatly affect the family structure!  What do I mean by family structure? well simply put: marriages and divorces… Policies that give financial benefits to single mothers will increase the incentive for women to have children “out of wedlock” increasing fertility but they could also contribute to a rise in divorces.  Such policies reduce the need for the second income a partner may provide.

I may not have all the answers but it seems to me that there’s enough economic research and real world evidence that suggests that government intervention is one of the main causes for the fertility problem and more of it could not only lead to the breakdown of the family structure but also contribute to reducing outcomes for those children in single parent households.

Recent research by prominent economists John Knowles and Nezi Guner explain that some subsidies affect household formation and human capital investment in children.   It is important to emphasize that University of Southampton (United-Kingdom) economist, Professor John Knowles, was awarded the Harry G. Johnson Prize by the Canadian Economics Association for the best paper published in the Canadian Journal of Economics in 2009. The prize, shared with co-author Professor Nezih Guner of Universitat Autònoma de Barcelona, for their paper ‘Why is the Rate of Single-Parenthood Lower in Canada than in the U.S.? A Dynamic Equilibrium Analysis of Welfare Policies,’ which appeared in the February, 2009 issue of the journal.

The Canadian Economics Association awards the Harry G. Johnson Prize each year to the author or authors of the paper judged to be the best paper published in the Canadian Journal of Economics in the preceding calendar year. The prize is named in honour of the distinguished Canadian economist who produced a large quantity of highly influential research particularly but not exclusively in international finance, international trade theory, and macroeconomics.

You can access the research online:

Why is the Rate of Single Parenthood Lower in Canada than in the U.S.? A Dynamic Equilibrium Analysis of Welfare Policies

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