Saving,fertility and public policy in an overlapping generations small open economy |
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| Affiliation: | 1. Department of Economics, Korea University, Seongbuk-Gu, Seoul, 02841, South Korea;2. Department of Economics, University of Washington, Seattle, WA 98195-3330, United States;1. Católica Lisbon School of Business and Economics, Palma de Cima, 1649-023 Lisboa, Portugal;2. Universidad de Vigo and REDE, Spain;1. University of Bielefeld, Germany;2. University Paris 1 Pantheon-Sorbonne, France;3. Paris School of Economics, University Paris 1 Pantheon-Sorbonne, France;1. University of Rome, Sapienza, Department of Economics and Law, Via del Castro Laurenziano, 9, I-00161 Rome, Italy;2. University of Macerata, Department of Law, Piaggia dell’Università, 2, I-62100 Macerata, Italy;1. Economics Department, University of Girona, Carrer de la Universitat, 10. Campus de Montilivi, 17003 Girona, Spain;2. Applied Economics Department, Autonomous University of Barcelona, 08193, Bellaterra, Barcelona, Spain |
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| Abstract: | Motivated by the recent increase of public debt experienced by many developed countries, we develop an OLG model to provide the fiscal policies needed for any public debt level to be sustainable in steady state and the consequences that such policies produce on saving and fertility in a small open economy. Our main finding is that a reduction of public debt (an event currently publicly debated) needs tax adjustments that eventually will be detrimental for both fertility and saving under a low-interest-rate regime (possibly similar to the current world regime), with opposite transitional effects on fertility and saving. On the contrary, the needed fiscal adjustments will eventually increase saving and fertility under a high-interest-rate regime, with opposite transitional effects on fertility and saving. Besides providing clear-cut policy implications, our analysis offers possible testable implications concerning the pattern of fertility, taxes and public debt observed in many developed economies. |
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| Keywords: | Overlapping generations Endogenous fertility Saving Small open economy Public national debt D15 H63 J13 |
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