Endogenous fertility and modified Pareto-optimality |
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Authors: | Günther Lang |
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Institution: | (1) Department of Business and Economics, University of Madeira, Penteada University Campus, 9000 - 390 Funchal, Portugal |
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Abstract: | In a world of endogenous fertility, where the number of descendants is an integral part of the economic allocation, the traditional
concept of Pareto-optimality cannot be applied any longer: the number of individuals to be present on earth may vary between
any two allocations we wish to compare. Therefore, the concept needs to be modified in order to give new life to the discussion
of economic efficiency. This work introduces a straightforward variation of the Pareto-principle and characterizes the optimality
of economic allocations according to this concept. It is shown that some of the well-known traditional results on intertemporal
optimality do no longer hold. In particular, lump-sum tax instruments (or the rearrangement of initial endowments) are no
longer a sufficient tool to achieve efficiency.
Received: March 2003, Accepted: September 2005
This work has greatly benefitted from comments by Oded Galor, Karl Shell, Vasco Santos and an excellent anonymous referee.
Many thanks to the Editor of this Journal for providing an impeccable refereeing process. Support by the European Union via
the Human Capital and Mobility Grant #ERBCHBICT941218 is gratefully acknowledged. |
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Keywords: | Endogenous fertility Modified Pareto-optimality Dynamic efficiency |
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