Abstract
In this paper, we consider two types of population policies observed in practice: birth limits and birth taxes. We find that both achieve very similar equilibrium solutions if tax revenue finances lump-sum transfers. By reducing fertility and promoting growth, both birth policies may achieve higher welfare than conventional education subsidies financed by income taxes. A birth tax for education subsidies can achieve the first-best solution. The welfare gain of the first-best policy may be equivalent to a massive 10–50% rise in income, depending on the degree of human capital externalities and the elasticity of intertemporal substitution.
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Shi, Y., Zhang, J. On high fertility rates in developing countries: birth limits, birth taxes, or education subsidies?. J Popul Econ 22, 603–640 (2009). https://doi.org/10.1007/s00148-008-0212-9
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DOI: https://doi.org/10.1007/s00148-008-0212-9