Is the fertility decline a consequence of the growth of the welfare state? Evidence from historical data

4. Conclusions

Put succinctly, our main point here has been that fertility should be modelled endogenously especially in the models, which purport to do serious policy analyses for the long term. Recently at least in Europe a considerable effort has been made to analyze the fiscal implications of ageing. In many of these analyses and scenario creations (see e.g. Oksanen 2003, and also 2004) it has, however, been assumed that possible changes in taxes and social security expenditures do not affect individual behaviour neither in terms of labour supply nor in terms of fertility. Although the labour supply effects are perhaps more important in the medium run, it is quite clear that in the long run the implications of fertility are dominant. Obviously, all the long-run analyses should be executed in such a fashion that labour supply and fertility are allowed to adjust to changes in fiscal variables. One should also keep in mind, that (all) government policies which try to increase fertility with various fiscal packages, might not be effective at all, but indeed could lead to results quite opposite to what was expected.

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