Endogenous fertility, family policy and multiple equilibria

In this paper we assess the role of direct monetary transfers to the benefit of households in raising children in a textbook Diamond (1965) style overlapping generations model. In particular, we examine how both the dynamics of capital and fertility of households are connected to a specific balanced budget policy to support child-rearing. We found that when the child allowance is higher than the fixed cost to children multiple equilibria are possible. As regards fertility, it is shown that increasing the child grant at too high a level may actually reduce the long-run population growth rate.Childcare Policy; Endogenous fertility; Multiple equilibria; OLG model