Jointly determined saving and fertility behaviour: Theory, and estimates for Germany, Italy, UK and USA

The comparative-statics predictions of models of the joint determination of household saving and fertility are derived under various hypotheses (self-interest, altruism of parents towards children, altruism of children towards parents, etc.) and compared with those of models which determine saving under the assumption of exogenous fertility. Country-specific saving and fertility equations are then estimated, using time series data for Germany, Italy, UK and USA. For each of the countries considered, the estimates are consistent with the hypothesis that saving and fertility are jointly determined by self-interested parents, and reject the alternative hypotheses. The data also show that a self-financing expansion of social security discourages fertility, and generally raises household saving.