Ageing, fertility, and growth

This paper analyses the interaction between human capital accumulation, fertility, and labour participation of families in the presence of technology shocks. Altruistic families spend time on the education of their children to increase their level of human capital. Compensating transfers through negative bequests are blocked by an active bequest constraint. Productivity shocks increase the opportunity costs of children and may cause a drop in fertility, which results in population ageing. We investigate the effects of ageing on allocation and welfare in the presence of a Pay-As-You-Go (PAYG) pension system. (c) 2004 Elsevier B.V. All rights reserved.