Economic consequences of different family policies – analysis using OLG model

Oliwia Komada, Group for Research in Applied Economics (GRAPE)
Krzysztof Makarski, Warsaw School of Economics
Pawel A. Strzelecki, Warsaw School of Economics

Low fertility is the key driver of population ageing. The aim of this paper is the estimation of the benefits that can result from the increase in fertility due to potentially successful family policy. In order to do this we combine the detailed analysis of the potential drivers of fertility with an advanced Overlapping Generation Model (OLG). This paper adds to the literature on that topic at least in three points. First, the estimation of the costs and benefits of the change in fertility is done using economic model which allows to take into account relationships between households, firms and government. Secondly, standard OLG model is extended by adding the heterogeneity of households with different number of children. Thirdly, scenarios of the fertility changes in this model include the information about the order of birth of children. It also allows to take into account the potential results of family policies that distinguish between the families with different number of children. This information also help to utilize the projections an information about the gap between desired and actual fertility.