Analysis On Fertility Intervention Policies With Productivity Shock

The world is now facing an unprecedented population ageing process, leading to a series problems, on pension insolvency, burdens on medical system and insufficiency of young labor supply. These problems have been receiving extensive concerns. However, the sharp declining fertility rate around the world is regarded as the main reason of population ageing.By reviewing related research on fertility since 1920s, we firstly set up a theoretical model to demonstrate that public pension system and productivity innovation decrease fertility rate. Secondly, by employing a computable dynamic □ general equilibrium model, I prove that the productivity shock has negative effect on fertility, extending the theoretical frontier of research on this area. Thirdly, by comparing the efficiencies of two fertility intervention policies, transfer payment subsidy (TPS) and pension accrue subsidy (PAS), I finds that applying pension accrue subsidy has a better effect on improving the downward trend of fertility rate caused by productivity shocks.Other important implications from our DGE model of are as follows.Firstly, productivity shocks improve wage rate and decrease fertility rate through increasing the time cost on raising children. While this result is robust as parameter varies.Secondly, TPS policy raises fertility rate through reducing the material cost on raising children.Thirdly, PAS policy could raise fertility rate through reducing the time cost to raising children.Fourthly, both TPS and PAS increase fertility rate under productivity shock.Fifthly, PAS boosts fertility more effectively than TPS; Furthermore, PAS does not impose additional taxation and distortion on economy, for PAS has no effect on the current public expenditure. And in this sense, PAS is a better choice.Sixthly, as fertility fluctuate the amounts of time spent on fertility and leisure changes in a way of highly negative correlation; however, the labor supply remains stable as always.The contributions of this paper are as follows:Firstly, this paper selects the amount of time spent on bringing up children as the proxy variable for fertility rate instead of the amount of children to highlight the time cost on raising children.Secondly, in this paper, I test the effect of intervention both at the scenario without and with productivity shock.Thirdly, I propose a PAS policy at the first time, and compare it with the prevailing TPS policy with respect to the effect on increasing the fertility rate.