Child Benefit and Fiscal Burden: OLG Model with Endogenous Fertility

Abstract

In this paper, we present an OLG simulation model with endogenous fertility to analyze the relationship between child benefit and fiscal burden. Our simulation results show that expansion of the child benefit will improve the welfare of current and future generations. On the other hand, our findings show that we cannot expect a significant long-term improvement in welfare solely from the increase of the consumption tax. If both the fiscal sustainability and the improvement of the welfare of current and future generations are requirements, we will need a policy-mix that includes both child benefit expansion and additional fiscal reform