Fertility Policies and Social Security Reforms in China
- Fertility Policies and Social Security Reforms in China
This paper analyzes the impact of relaxing fertility controls and expanding social security in China. We develop an overlapping generations model in which fertility decisions and capital accumulation are endogenously determined in the presence of social security. In our model, children are an alternative savings technology—as they transfer resources to their retired parents. Important feedback links arise between fertility and social security variables: an expansion of social security beneﬁts reduces fertility—partially offsetting the effects of relaxing the one-child policy. The feedback loop between social security variables and fertility suggests that abandoning fertility restrictions may not be as effective in helping to ﬁnance China’s intended pension reform, especially if children are an important source of old-age support. The sustainability of the pension system is particularly at risk in the event of a growth slowdown. The objective of pension reforms may also be incongruent with other reforms, such as ﬁnancial liberalization and ﬁnancial integration.
Nicolas Coeurdacier is Associate Professor at the Sciences Po Departement of Economics
Stéphane Guibaud is Assistant Professor of Finance at the Sciences Po Departement of Economics
Keyu Jin is Assistant Professor at the LSE Centre for Macroeconomics