We want to use macro models to evaluate effects of differenet demographic scenarios Demographics drives majority of the macroeconomic changes in the foreseeable future Fiscal effects will be large and unavoidable but larger TFR can mitigate them Strong (political) discussions about ways to prevent demographic catastrophe... ...but what is the adequate cost of family policy - even if successful? Figures we obtain go beyond the simple calculations in Excel (forward looking agents)

1. OLG analysis of fertility shocks
Economic consequences of changing fertility.
Insights from an OLG model
Magdalena Malec
1 2
Krzysztof Makarski
123
Pawel Strzelecki
123
with help from Oliwia Komada
1
Warsaw School of Economics
2
GRAPE
3
Economic Institute, National Bank of Poland
EPC 2016. Presentation: 02.09.2016
1 / 19

2. OLG analysis of fertility shocks
Motivation
Economic response to succesfull family policy
Projections beyond accounting - economic reactions of agents
How to measure changes in fertility: Number of children and labour force participation
Contributions:
1 scal and welfare analyses of pension systems using Overlapping Generations Model
(OLG) under dierent fertility scenarios
2 the nal version of the model will also include changes in parity progression rates
Today: the use of OLG model to asess the economic gains from higher fertility with
example
2 / 19

3. OLG analysis of fertility shocks
Motivation
Economic response to succesfull family policy
Projections beyond accounting - economic reactions of agents
How to measure changes in fertility: Number of children and labour force participation
Contributions:
1 scal and welfare analyses of pension systems using Overlapping Generations Model
(OLG) under dierent fertility scenarios
2 the nal version of the model will also include changes in parity progression rates
Today: the use of OLG model to asess the economic gains from higher fertility with
example
2 / 19

4. OLG analysis of fertility shocks
Motivation
Economic response to succesfull family policy
Projections beyond accounting - economic reactions of agents
How to measure changes in fertility: Number of children and labour force participation
Contributions:
1 scal and welfare analyses of pension systems using Overlapping Generations Model
(OLG) under dierent fertility scenarios
2 the nal version of the model will also include changes in parity progression rates
Today: the use of OLG model to asess the economic gains from higher fertility with
example
2 / 19

5. OLG analysis of fertility shocks
Motivation
Economic response to succesfull family policy
Projections beyond accounting - economic reactions of agents
How to measure changes in fertility: Number of children and labour force participation
Contributions:
1 scal and welfare analyses of pension systems using Overlapping Generations Model
(OLG) under dierent fertility scenarios
2 the nal version of the model will also include changes in parity progression rates
Today: the use of OLG model to asess the economic gains from higher fertility with
example
2 / 19

6. OLG analysis of fertility shocks
Motivation
Economic response to succesfull family policy
Projections beyond accounting - economic reactions of agents
How to measure changes in fertility: Number of children and labour force participation
Contributions:
1 scal and welfare analyses of pension systems using Overlapping Generations Model
(OLG) under dierent fertility scenarios
2 the nal version of the model will also include changes in parity progression rates
Today: the use of OLG model to asess the economic gains from higher fertility with
example
2 / 19

7. OLG analysis of fertility shocks
Motivation
Questions
How does demographics aect macroeconomic and scal stability?
with lower fertility ⇒ less labor supply ⇒ worse economic dependency ratio
but expecting lower fertility rational agents make provisions
what if demography surprises and what if not?
3 / 19

8. OLG analysis of fertility shocks
Motivation
Questions
How does demographics aect macroeconomic and scal stability?
with lower fertility ⇒ less labor supply ⇒ worse economic dependency ratio
but expecting lower fertility rational agents make provisions
what if demography surprises and what if not?
3 / 19

9. OLG analysis of fertility shocks
Motivation
Questions
How does demographics aect macroeconomic and scal stability?
with lower fertility ⇒ less labor supply ⇒ worse economic dependency ratio
but expecting lower fertility rational agents make provisions
what if demography surprises and what if not?
3 / 19

10. OLG analysis of fertility shocks
Motivation
Questions
How does demographics aect macroeconomic and scal stability?
with lower fertility ⇒ less labor supply ⇒ worse economic dependency ratio
but expecting lower fertility rational agents make provisions
what if demography surprises and what if not?
3 / 19

11. OLG analysis of fertility shocks
Motivation
What do we do?
We develop an OLG model and use it to measure the eects of fertility on the
economy
Things we really care for:
private and public savings (inter-temporal choice)
labor supply decision (intra-temporal choice)
pension system is scally neutral (dened contribution)
calibrating the model closely to the data
exogenous but varying economic growth (technological progress)
exogenous but varying fertility
Things we simplify:
production sector (competitive producers with C-D production function and
depreciation)
labor market (elastic labor)
no heterogeneity within cohorts
stable mortality (focus on fertility, isolate)
4 / 19

12. OLG analysis of fertility shocks
Motivation
What do we do?
We develop an OLG model and use it to measure the eects of fertility on the
economy
Things we really care for:
private and public savings (inter-temporal choice)
labor supply decision (intra-temporal choice)
pension system is scally neutral (dened contribution)
calibrating the model closely to the data
exogenous but varying economic growth (technological progress)
exogenous but varying fertility
Things we simplify:
production sector (competitive producers with C-D production function and
depreciation)
labor market (elastic labor)
no heterogeneity within cohorts
stable mortality (focus on fertility, isolate)
4 / 19

13. OLG analysis of fertility shocks
Motivation
What do we do?
We develop an OLG model and use it to measure the eects of fertility on the
economy
Things we really care for:
private and public savings (inter-temporal choice)
labor supply decision (intra-temporal choice)
pension system is scally neutral (dened contribution)
calibrating the model closely to the data
exogenous but varying economic growth (technological progress)
exogenous but varying fertility
Things we simplify:
production sector (competitive producers with C-D production function and
depreciation)
labor market (elastic labor)
no heterogeneity within cohorts
stable mortality (focus on fertility, isolate)
4 / 19

14. OLG analysis of fertility shocks
Motivation
What do we do?
We develop an OLG model and use it to measure the eects of fertility on the
economy
Things we really care for:
private and public savings (inter-temporal choice)
labor supply decision (intra-temporal choice)
pension system is scally neutral (dened contribution)
calibrating the model closely to the data
exogenous but varying economic growth (technological progress)
exogenous but varying fertility
Things we simplify:
production sector (competitive producers with C-D production function and
depreciation)
labor market (elastic labor)
no heterogeneity within cohorts
stable mortality (focus on fertility, isolate)
4 / 19

15. OLG analysis of fertility shocks
Motivation
What do we do?
We develop an OLG model and use it to measure the eects of fertility on the
economy
Things we really care for:
private and public savings (inter-temporal choice)
labor supply decision (intra-temporal choice)
pension system is scally neutral (dened contribution)
calibrating the model closely to the data
exogenous but varying economic growth (technological progress)
exogenous but varying fertility
Things we simplify:
production sector (competitive producers with C-D production function and
depreciation)
labor market (elastic labor)
no heterogeneity within cohorts
stable mortality (focus on fertility, isolate)
4 / 19

16. OLG analysis of fertility shocks
Motivation
What do we do?
We develop an OLG model and use it to measure the eects of fertility on the
economy
Things we really care for:
private and public savings (inter-temporal choice)
labor supply decision (intra-temporal choice)
pension system is scally neutral (dened contribution)
calibrating the model closely to the data
exogenous but varying economic growth (technological progress)
exogenous but varying fertility
Things we simplify:
production sector (competitive producers with C-D production function and
depreciation)
labor market (elastic labor)
no heterogeneity within cohorts
stable mortality (focus on fertility, isolate)
4 / 19

17. OLG analysis of fertility shocks
Motivation
What do we do?
We develop an OLG model and use it to measure the eects of fertility on the
economy
Things we really care for:
private and public savings (inter-temporal choice)
labor supply decision (intra-temporal choice)
pension system is scally neutral (dened contribution)
calibrating the model closely to the data
exogenous but varying economic growth (technological progress)
exogenous but varying fertility
Things we simplify:
production sector (competitive producers with C-D production function and
depreciation)
labor market (elastic labor)
no heterogeneity within cohorts
stable mortality (focus on fertility, isolate)
4 / 19

18. OLG analysis of fertility shocks
Motivation
What do we do?
We develop an OLG model and use it to measure the eects of fertility on the
economy
Things we really care for:
private and public savings (inter-temporal choice)
labor supply decision (intra-temporal choice)
pension system is scally neutral (dened contribution)
calibrating the model closely to the data
exogenous but varying economic growth (technological progress)
exogenous but varying fertility
Things we simplify:
production sector (competitive producers with C-D production function and
depreciation)
labor market (elastic labor)
no heterogeneity within cohorts
stable mortality (focus on fertility, isolate)
4 / 19

19. OLG analysis of fertility shocks
Motivation
What do we do?
We develop an OLG model and use it to measure the eects of fertility on the
economy
Things we really care for:
private and public savings (inter-temporal choice)
labor supply decision (intra-temporal choice)
pension system is scally neutral (dened contribution)
calibrating the model closely to the data
exogenous but varying economic growth (technological progress)
exogenous but varying fertility
Things we simplify:
production sector (competitive producers with C-D production function and
depreciation)
labor market (elastic labor)
no heterogeneity within cohorts
stable mortality (focus on fertility, isolate)
4 / 19

20. OLG analysis of fertility shocks
Motivation
What do we do?
We develop an OLG model and use it to measure the eects of fertility on the
economy
Things we really care for:
private and public savings (inter-temporal choice)
labor supply decision (intra-temporal choice)
pension system is scally neutral (dened contribution)
calibrating the model closely to the data
exogenous but varying economic growth (technological progress)
exogenous but varying fertility
Things we simplify:
production sector (competitive producers with C-D production function and
depreciation)
labor market (elastic labor)
no heterogeneity within cohorts
stable mortality (focus on fertility, isolate)
4 / 19

21. OLG analysis of fertility shocks
Motivation
What do we do?
We develop an OLG model and use it to measure the eects of fertility on the
economy
Things we really care for:
private and public savings (inter-temporal choice)
labor supply decision (intra-temporal choice)
pension system is scally neutral (dened contribution)
calibrating the model closely to the data
exogenous but varying economic growth (technological progress)
exogenous but varying fertility
Things we simplify:
production sector (competitive producers with C-D production function and
depreciation)
labor market (elastic labor)
no heterogeneity within cohorts
stable mortality (focus on fertility, isolate)
4 / 19

22. OLG analysis of fertility shocks
Motivation
What do we do?
We develop an OLG model and use it to measure the eects of fertility on the
economy
Things we really care for:
private and public savings (inter-temporal choice)
labor supply decision (intra-temporal choice)
pension system is scally neutral (dened contribution)
calibrating the model closely to the data
exogenous but varying economic growth (technological progress)
exogenous but varying fertility
Things we simplify:
production sector (competitive producers with C-D production function and
depreciation)
labor market (elastic labor)
no heterogeneity within cohorts
stable mortality (focus on fertility, isolate)
4 / 19

23. OLG analysis of fertility shocks
Motivation
What do we do?
We develop an OLG model and use it to measure the eects of fertility on the
economy
Things we really care for:
private and public savings (inter-temporal choice)
labor supply decision (intra-temporal choice)
pension system is scally neutral (dened contribution)
calibrating the model closely to the data
exogenous but varying economic growth (technological progress)
exogenous but varying fertility
Things we simplify:
production sector (competitive producers with C-D production function and
depreciation)
labor market (elastic labor)
no heterogeneity within cohorts
stable mortality (focus on fertility, isolate)
4 / 19

24. OLG analysis of fertility shocks
Model
Roadmap
1 Motivation
2 Model
3 Calibration
4 Results
5 Summary
5 / 19

25. OLG analysis of fertility shocks
Model
What we expect before modeling?
with fertility below replacement population shrinks
but per capita economy is constant (driven by deep parameters)
shocks in fertility will necessitate adjustment
↑ savings (to match the same K/L)
↑ output (as a consequence of ↑ K)
↓ taxes ceteris paribus
HENCE transitory lasting eects (↑ population, ↑ capital, ↑ output)
transitory welfare eects
a tool to test can we aord a given fertility policy
a way to show, who pays and who gains
6 / 19

26. OLG analysis of fertility shocks
Model
What we expect before modeling?
with fertility below replacement population shrinks
but per capita economy is constant (driven by deep parameters)
shocks in fertility will necessitate adjustment
↑ savings (to match the same K/L)
↑ output (as a consequence of ↑ K)
↓ taxes ceteris paribus
HENCE transitory lasting eects (↑ population, ↑ capital, ↑ output)
transitory welfare eects
a tool to test can we aord a given fertility policy
a way to show, who pays and who gains
6 / 19

27. OLG analysis of fertility shocks
Model
What we expect before modeling?
with fertility below replacement population shrinks
but per capita economy is constant (driven by deep parameters)
shocks in fertility will necessitate adjustment
↑ savings (to match the same K/L)
↑ output (as a consequence of ↑ K)
↓ taxes ceteris paribus
HENCE transitory lasting eects (↑ population, ↑ capital, ↑ output)
transitory welfare eects
a tool to test can we aord a given fertility policy
a way to show, who pays and who gains
6 / 19

28. OLG analysis of fertility shocks
Model
What we expect before modeling?
with fertility below replacement population shrinks
but per capita economy is constant (driven by deep parameters)
shocks in fertility will necessitate adjustment
↑ savings (to match the same K/L)
↑ output (as a consequence of ↑ K)
↓ taxes ceteris paribus
HENCE transitory lasting eects (↑ population, ↑ capital, ↑ output)
transitory welfare eects
a tool to test can we aord a given fertility policy
a way to show, who pays and who gains
6 / 19

29. OLG analysis of fertility shocks
Model
What we expect before modeling?
with fertility below replacement population shrinks
but per capita economy is constant (driven by deep parameters)
shocks in fertility will necessitate adjustment
↑ savings (to match the same K/L)
↑ output (as a consequence of ↑ K)
↓ taxes ceteris paribus
HENCE transitory lasting eects (↑ population, ↑ capital, ↑ output)
transitory welfare eects
a tool to test can we aord a given fertility policy
a way to show, who pays and who gains
6 / 19

30. OLG analysis of fertility shocks
Model
What we expect before modeling?
with fertility below replacement population shrinks
but per capita economy is constant (driven by deep parameters)
shocks in fertility will necessitate adjustment
↑ savings (to match the same K/L)
↑ output (as a consequence of ↑ K)
↓ taxes ceteris paribus
HENCE transitory lasting eects (↑ population, ↑ capital, ↑ output)
transitory welfare eects
a tool to test can we aord a given fertility policy
a way to show, who pays and who gains
6 / 19

31. OLG analysis of fertility shocks
Model
Consumers
are paid a market clearing wage for labor supplied
receive market clearing interest on private savings
are free to choose how much to work, retire at ¯J
die with certitude at J, but have a non-zero probability of dying before
Optimize lifetime utility derived from leisure and consumption
Uj(cj,t, lj,t) = uj(cj,t, lj,t) +
J−j
s=1
δs πj+s,t+s
πj,t
u (cj+s,t+s, lj+s,t+s) (1)
subject to
(1 + τc,t)cj,t + sj,t + τj + υt = (1 − τι
j,t − τl,t)wj,tlj,t ← labor income
+ (1 + rt(1 − τk,t))sj,t−1 ← capital income
+ (1 − τl,t)pι,j,t + bj,t ← pensions + bequests
where u(c, l) = φ log(c) + (1 − φ) log(1 − l)
7 / 19

32. OLG analysis of fertility shocks
Model
Producers
maximize
Yt − wtLt − (rk
t + d)Kt subject to Yt = Kα
t (ztLt)1−α
where the path of {z}∞
t=0 is exogenous (calibrated to AWG, by EC)
Interest rate
interest rate on capital rk
t = MPK − d, endogenous
8 / 19

33. OLG analysis of fertility shocks
Model
Producers
maximize
Yt − wtLt − (rk
t + d)Kt subject to Yt = Kα
t (ztLt)1−α
where the path of {z}∞
t=0 is exogenous (calibrated to AWG, by EC)
Interest rate
interest rate on capital rk
t = MPK − d, endogenous
8 / 19

34. OLG analysis of fertility shocks
Model
Public nances
Social Security Institution (ZUS) collects social security contributions and pays out
pensions
by construction of NDC, system scally balanced (full actuary fairness)
Government
collects taxes on earnings, interest and consumption + υ
spends xed amount of GDP on consumption + services debt
long run debt/GDP ratio xed
Role of + υ
if fertility did not change, υ would measure per capita tax/subsidy
once fertility changes, we may measure deviations from υ
express as % of initial GDP = gains from higher fertility
9 / 19

35. OLG analysis of fertility shocks
Model
Public nances
Social Security Institution (ZUS) collects social security contributions and pays out
pensions
by construction of NDC, system scally balanced (full actuary fairness)
Government
collects taxes on earnings, interest and consumption + υ
spends xed amount of GDP on consumption + services debt
long run debt/GDP ratio xed
Role of + υ
if fertility did not change, υ would measure per capita tax/subsidy
once fertility changes, we may measure deviations from υ
express as % of initial GDP = gains from higher fertility
9 / 19

36. OLG analysis of fertility shocks
Model
Public nances
Social Security Institution (ZUS) collects social security contributions and pays out
pensions
by construction of NDC, system scally balanced (full actuary fairness)
Government
collects taxes on earnings, interest and consumption + υ
spends xed amount of GDP on consumption + services debt
long run debt/GDP ratio xed
Role of + υ
if fertility did not change, υ would measure per capita tax/subsidy
once fertility changes, we may measure deviations from υ
express as % of initial GDP = gains from higher fertility
9 / 19

37. OLG analysis of fertility shocks
Model
What are the fertility shocks?
1 We start from decreasing population (fertility below replacement) ⇐ matched to data
2 For some xed period of time, we allow fertility change
sudden, unexpected increase in the entry size by 10% for 10 years
sudden, unexpected increase in the entry cohort size by 20% for 10 years
additionally: sudden, unexpected decrease in entry cohort size by 10% for 10 years
3 Compute ˜υ relative to before change υ (expressed as % of GDP or in raw terms)
What is baseline?
Constant mortality
Gradually decaying technological progress (fully expected)
10 / 19

38. OLG analysis of fertility shocks
Model
What are the fertility shocks?
1 We start from decreasing population (fertility below replacement) ⇐ matched to data
2 For some xed period of time, we allow fertility change
sudden, unexpected increase in the entry size by 10% for 10 years
sudden, unexpected increase in the entry cohort size by 20% for 10 years
additionally: sudden, unexpected decrease in entry cohort size by 10% for 10 years
3 Compute ˜υ relative to before change υ (expressed as % of GDP or in raw terms)
What is baseline?
Constant mortality
Gradually decaying technological progress (fully expected)
10 / 19

39. OLG analysis of fertility shocks
Model
What are the fertility shocks?
1 We start from decreasing population (fertility below replacement) ⇐ matched to data
2 For some xed period of time, we allow fertility change
sudden, unexpected increase in the entry size by 10% for 10 years
sudden, unexpected increase in the entry cohort size by 20% for 10 years
additionally: sudden, unexpected decrease in entry cohort size by 10% for 10 years
3 Compute ˜υ relative to before change υ (expressed as % of GDP or in raw terms)
What is baseline?
Constant mortality
Gradually decaying technological progress (fully expected)
10 / 19

40. OLG analysis of fertility shocks
Model
What are the fertility shocks?
1 We start from decreasing population (fertility below replacement) ⇐ matched to data
2 For some xed period of time, we allow fertility change
sudden, unexpected increase in the entry size by 10% for 10 years
sudden, unexpected increase in the entry cohort size by 20% for 10 years
additionally: sudden, unexpected decrease in entry cohort size by 10% for 10 years
3 Compute ˜υ relative to before change υ (expressed as % of GDP or in raw terms)
What is baseline?
Constant mortality
Gradually decaying technological progress (fully expected)
10 / 19

41. OLG analysis of fertility shocks
Calibration
Roadmap
1 Motivation
2 Model
3 Calibration
4 Results
5 Summary
11 / 19

42. OLG analysis of fertility shocks
Calibration
Calibration to replicate 2010 economy
Preference for leisure (φ) matches participation rate of 56.8%
Contribution rate (ρ) matches benets/GDP ratio of 6%
Labor income tax (τl) set to 11% to match PIT/GDP ratio
Consumption tax (τc) set to match VAT/GDP ratio
Capital tax (τk) de iure = de facto
12 / 19

43. OLG analysis of fertility shocks
Calibration
Labor augmenting technological progress
Historical data, projection from AWG, new steady state at 1.7%
13 / 19

44. OLG analysis of fertility shocks
Calibration
Baseline fertility and other scenarios
14 / 19

45. OLG analysis of fertility shocks
Results
Roadmap
1 Motivation
2 Model
3 Calibration
4 Results
5 Summary
15 / 19

46. OLG analysis of fertility shocks
Results
What are the gains from higher fertility?
Due to decreasing population, per capita taxes in general grow (= how much consumption
people have to give up)
(relative to initial steady state of app. 4.6% of GDP)
16 / 19

47. OLG analysis of fertility shocks
Results
What are the gains from higher fertility?
If population is shrinking less, taxes grow by less
17 / 19

48. OLG analysis of fertility shocks
Summary
Roadmap
1 Motivation
2 Model
3 Calibration
4 Results
5 Summary
18 / 19

49. OLG analysis of fertility shocks
Summary
A proof of concept?
We want to use macro models to evaluate eects of dierenet demographic scenarios
Demographics drives majority of the macroeconomic changes in the foreseeable future
Fiscal eects will be large and unavoidable but larger TFR can mitigate them
Strong (political) discussions about ways to prevent demographic catastrophe...
...but what is the adequate cost of family policy - even if successful?
Figures we obtain go beyond the simple calculations in Excel (forward looking agents)
To do
Full model with fertility choice
Analyze alternative paths of fertility changes (more multiple vs less childless families)
Provide welfare measures (caveat: welfare of the otherwise born and otherwise
not-born)
19 / 19

50. OLG analysis of fertility shocks
Summary
A proof of concept?
We want to use macro models to evaluate eects of dierenet demographic scenarios
Demographics drives majority of the macroeconomic changes in the foreseeable future
Fiscal eects will be large and unavoidable but larger TFR can mitigate them
Strong (political) discussions about ways to prevent demographic catastrophe...
...but what is the adequate cost of family policy - even if successful?
Figures we obtain go beyond the simple calculations in Excel (forward looking agents)
To do
Full model with fertility choice
Analyze alternative paths of fertility changes (more multiple vs less childless families)
Provide welfare measures (caveat: welfare of the otherwise born and otherwise
not-born)
19 / 19

51. OLG analysis of fertility shocks
Summary
A proof of concept?
We want to use macro models to evaluate eects of dierenet demographic scenarios
Demographics drives majority of the macroeconomic changes in the foreseeable future
Fiscal eects will be large and unavoidable but larger TFR can mitigate them
Strong (political) discussions about ways to prevent demographic catastrophe...
...but what is the adequate cost of family policy - even if successful?
Figures we obtain go beyond the simple calculations in Excel (forward looking agents)
To do
Full model with fertility choice
Analyze alternative paths of fertility changes (more multiple vs less childless families)
Provide welfare measures (caveat: welfare of the otherwise born and otherwise
not-born)
19 / 19

52. OLG analysis of fertility shocks
Summary
A proof of concept?
We want to use macro models to evaluate eects of dierenet demographic scenarios
Demographics drives majority of the macroeconomic changes in the foreseeable future
Fiscal eects will be large and unavoidable but larger TFR can mitigate them
Strong (political) discussions about ways to prevent demographic catastrophe...
...but what is the adequate cost of family policy - even if successful?
Figures we obtain go beyond the simple calculations in Excel (forward looking agents)
To do
Full model with fertility choice
Analyze alternative paths of fertility changes (more multiple vs less childless families)
Provide welfare measures (caveat: welfare of the otherwise born and otherwise
not-born)
19 / 19

53. OLG analysis of fertility shocks
Summary
A proof of concept?
We want to use macro models to evaluate eects of dierenet demographic scenarios
Demographics drives majority of the macroeconomic changes in the foreseeable future
Fiscal eects will be large and unavoidable but larger TFR can mitigate them
Strong (political) discussions about ways to prevent demographic catastrophe...
...but what is the adequate cost of family policy - even if successful?
Figures we obtain go beyond the simple calculations in Excel (forward looking agents)
To do
Full model with fertility choice
Analyze alternative paths of fertility changes (more multiple vs less childless families)
Provide welfare measures (caveat: welfare of the otherwise born and otherwise
not-born)
19 / 19

54. OLG analysis of fertility shocks
Summary
A proof of concept?
We want to use macro models to evaluate eects of dierenet demographic scenarios
Demographics drives majority of the macroeconomic changes in the foreseeable future
Fiscal eects will be large and unavoidable but larger TFR can mitigate them
Strong (political) discussions about ways to prevent demographic catastrophe...
...but what is the adequate cost of family policy - even if successful?
Figures we obtain go beyond the simple calculations in Excel (forward looking agents)
To do
Full model with fertility choice
Analyze alternative paths of fertility changes (more multiple vs less childless families)
Provide welfare measures (caveat: welfare of the otherwise born and otherwise
not-born)
19 / 19

55. OLG analysis of fertility shocks
Summary
A proof of concept?
We want to use macro models to evaluate eects of dierenet demographic scenarios
Demographics drives majority of the macroeconomic changes in the foreseeable future
Fiscal eects will be large and unavoidable but larger TFR can mitigate them
Strong (political) discussions about ways to prevent demographic catastrophe...
...but what is the adequate cost of family policy - even if successful?
Figures we obtain go beyond the simple calculations in Excel (forward looking agents)
To do
Full model with fertility choice
Analyze alternative paths of fertility changes (more multiple vs less childless families)
Provide welfare measures (caveat: welfare of the otherwise born and otherwise
not-born)
19 / 19

56. OLG analysis of fertility shocks
Summary
A proof of concept?
We want to use macro models to evaluate eects of dierenet demographic scenarios
Demographics drives majority of the macroeconomic changes in the foreseeable future
Fiscal eects will be large and unavoidable but larger TFR can mitigate them
Strong (political) discussions about ways to prevent demographic catastrophe...
...but what is the adequate cost of family policy - even if successful?
Figures we obtain go beyond the simple calculations in Excel (forward looking agents)
To do
Full model with fertility choice
Analyze alternative paths of fertility changes (more multiple vs less childless families)
Provide welfare measures (caveat: welfare of the otherwise born and otherwise
not-born)
19 / 19