SFB 303 Discussion Paper No. A - 535

Author: Schweizer, Urs
Title: Welfare Economics of Population Growth
Abstract: This paper presents welfare theorems for steady states of overlapping-generations models where fertility is an endogenous choice variable. A surplus function is introduced which serves as a welfare indicator. Based on this function, a purely ordinal welfare criterion is proposed which covers the case of a variable population and which works for open as well as closed economies. Efficient states can be supported by prices and a system of child allowances, retirement benefits and lumpsum contributions. The derivatives of the welfare indicator are expressed in terms of the institutional arrangement. In particular, the derivative of the surplus function with respect to the population growth factor is shown to be equal to aggregate retirement benefits net of child allowances.
Keywords: Endogenous Fertility, Welfare Theorems, Club Theory, Surplus Function
JEL-Classification-Number: D60, J13, D71, D90
Creation-Date: October 1996
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