nep-dem New Economics Papers
on Demographic Economics
Issue of 2019‒04‒15
six papers chosen by
Héctor Pifarré i Arolas
Universitat Pompeu Fabra

  1. Population size and the size of government By Tim Krieger; Daniel Meierrieks
  2. Do Parents Work More When Children Start School? Evidence from the Netherlands By Swart, Lisette; Van den Berge, Wiljan; van der Wiel, Karen
  3. Demographics and the natural real interest rate: historical and projected paths for the euro area By Papetti, Andrea
  4. Is the Drop in Fertility Due to the Great Recession or a Permanent Change? By Alicia H. Munnell; Anqi Chen; Geoffrey T. Sanzenbacher
  5. All-time low period fertility in Finland: drivers, tempo effects, and cohort implications By Julia Hellstrand; Mikko Myrskylä; Jessica Nisén
  6. Missing poor in the U.S. By LEFEBVRE Mathieu,; PESTIEAU Pierre,; PONTHIERE Gregory,

  1. By: Tim Krieger; Daniel Meierrieks
    Abstract: We examine the effect of population size on government size for a panel of 130 countries for the period between 1970 and 2014. We show that previous analyses of the nexus between population size and government size are incorrectly specified and fail to consider the influence of cross-sectional dependence, non-stationarity and cointegration. Using a panel time-series approach that adequately accounts for these issues, we find that population size has a positive long-run effect on government size. This finding suggests that effects of population size that increase government size (primarily due to the costs of heterogeneity, congestion, crime and conflict) dominate effects that reduce government size (primarily due to scale economies).
    Keywords: government size, population size, non-stationary, cross-sectional dependence, panel cointegration
    JEL: H11 H50
    Date: 2019
  2. By: Swart, Lisette (CPB Netherlands Bureau for Economic Policy Analysis); Van den Berge, Wiljan (CPB Netherlands Bureau for Economic Policy Analysis); van der Wiel, Karen (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: When children start school, parents save time and/or money. In this paper, we empirically examine the impact of these changes to the family's budget constraint on parents' working hours. Labor supply is theoretically expected to increase for parents who used to spend time taking care of their children, but to decrease for fulltime working parents because of an income effect: child care expenses drop. We show that the effect of additional time dominates the income effect in the Netherlands, where children start school (kindergarten) for approximately 20 hours a week in the month that they turn 4. Using detailed administrative data on all parents, we find that the average mother's hours worked increases by 3% when her youngest child starts going to school. For their partners, who experience a much smaller shock in terms of time, the increase in hours worked is also much smaller at 0.4%.
    Keywords: labor supply, starting school, child care
    JEL: J13 J22
    Date: 2019–03
  3. By: Papetti, Andrea
    Abstract: This paper employs an aggregate representation of an overlapping generation (OLG) model quantifying a decrease of the natural real interest rate in the range of -1.7 and -0.4 percentage points in the euro area between 1990 and 2030 due to demographics alone. Two channels contribute to this downward impact: the increasing scarcity of effective labor input and the increasing willingness to save by individuals due to longer life expectancy. The decrease of the aggregate saving rate as individuals retire has an upward impact which is never strong enough. Mitigating factors are: higher substitutability between labor and capital, higher intertemporal elasticity of substitution in consumption, reforms aiming at increasing the relative productivity of older cohorts, the participation rate and the retirement age. The simulated path of the natural real interest rate is consistent with recent econometric estimates: an upward trend in the 70s and 80s and a prolonged decline afterward. JEL Classification: E17, E21, E43, E52, J11
    Keywords: aging, demographic transition, euro area, natural interest rate, secular stagnation
    Date: 2019–03
  4. By: Alicia H. Munnell; Anqi Chen; Geoffrey T. Sanzenbacher
    Abstract: In the United States, the current birth rate has declined since the Great Recession. The question is whether this decline is a temporary response to the economic downturn or a drift to the lower levels seen in many other large developed countries. This paper identifies factors from the literature – both cyclical and structural – that affect the fertility rate and estimates the magnitude of these effects based on the variation across states. The cyclical analysis shows that while the total fertility rate (TFR) generally appears to be pro-cyclical, it has not rebounded with the recovery from the Great Recession. As a result, the analysis decomposes the structural factors that affect fertility – race/ethnicity, education, religion, the opportunity cost for women, and the explicit costs of raising a child. The results show that an increase in the number of women with a college education, an increase in the ratio of child care costs to income, and an increase in the female-male wage ratio can explain more than half of the decline in the total fertility rate from the period of 2001-2003 to the period of 2014-2016.
    Date: 2019–03
  5. By: Julia Hellstrand; Mikko Myrskylä (Max Planck Institute for Demographic Research, Rostock, Germany); Jessica Nisén (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: In several European countries previously characterized by relatively high and stable cohort fertility, and particularly in the Nordic countries, period total fertility rates (TFR) have declined since 2010. The largest of these declines has been observed in Finland, where the TFR reached an all-time low of 1.49 in 2017. We analyze the decrease in the TFR in Finland since 2010, and assess the consequences of this trend for the completed fertility of women currently of childbearing age using complementary approaches that build on existing parametric and novel nonparametric methods. Decomposition of the fertility decline shows that this trend has been close to universal, with all age groups and parities contributing, but with first-order births and ages 25-29 making the largest contributions. At older ages, we document an important qualitative shift in fertility dynamics: for the first time since the early 1970s, women aged 30+ are experiencing a sustained fertility decline. All of our forecasting methods suggest that cohort fertility is likely to decline from the 1.85-1.95 level that was reached by the 1940-1970 cohorts, to a level of 1.75 or below among women born in the mid-1980s. The tempo-adjusted TFR also suggests that quantum change is driving the decline. These findings are evidence of a strong quantum effect, and are particularly striking because they call into question whether Finland will continue to be part of the Nordic fertility regime, which has been characterized by high and stable fertility.
    Keywords: Finland, cohort fertility, forecasts
    JEL: J1 Z0
    Date: 2019–04
  6. By: LEFEBVRE Mathieu, (BETA, Université de Strasbourg); PESTIEAU Pierre, (Université de Liège, CORE, UCLouvain and Paris School of Economics); PONTHIERE Gregory, (Université Paris 12, Paris School of Economics and Institut Universitaire de France)
    Abstract: Given that poor individuals face worse survival conditions than non-poor individuals, one can expect that a steeper income/mortality gradient leads, through stronger income-based selection, to a lower poverty rate at the old age (i.e. the “missing poor” hypothesis). This paper uses U.S. state-level data on poverty at age 65+ and life expectancy by income levels to provide an empirical test of the missing poor hypothesis. Using air pollution as an instrument for mortality differentials, we show that instrument changes in mortality differentials have a negative and statistically significant effect on old-age proverty: A 1 % increase in the mortality differential implies a 9 % decrease in the 65+ headcount poverty rate. Using those regression results, we compute hypothetical old-age poverty rates while neutralizing the impact of the income/mortality gradient, and show that correcting for heterogeneity in income-based selection effects modifies the comparison of old-age poverty prevalence across states.
    Keywords: poverty, measurement, income/mortality gradient, selection biases, comparability
    JEL: I32
    Date: 2019–01–29

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