Macroeconomic Analysis of the Child Benefit : Fertility, Demographic Structure, and Welfare

This study examines the macroeconomic and welfare effects of the child benefit, using a general equilibrium overlapping generations model incorporating fertility choices. The model is calibrated to the Japanese economy and produces the benefit elasticity of fertility in line with the empirical estimates. Expanding the per-child payment would lead to welfare gains for future generations in stationary equilibrium. Notably, the long-run gains extend to individuals who are childless throughout their lives and do not receive child benefits. Higher fertility rates in the new equilibrium and the resulting demographic change account for the results via several channels. However, the accrual of welfare gains is gradual and spans approximately 100 years. This is because the gains are contingent on the demographic shift, necessitating sufficient transition periods