Abstract ：
This paper presents an analysis of the effects of public old-age support on individuals’ fertility decisions and the long-term equilibrium by assuming strategic bequest motives of individuals in a discrete-time overlapping generations model. An increased wage tax for financing public old-age support reduces the opportunity cost of child-rearing time, although it decreases after-tax income. The increased public support tends to decrease the family old-age support time. Thereby, the net effect of public support on fertility is positive when the rationality constraint is binding. Nevertheless, the tax increase lowers the per-worker capital. Therefore, the net effect of public support on the long-term lifetime utility of an individual is ambiguous. It is also shown that intergenerational exchange based on strategic bequest motives might lead to excessively high fertility rate compared to social optimum.

JEL Classification: D13, J13, J14, J22

Keywrods: fertility, old-age support, rationality constraint, strategic bequest motives