Comparing Fertility-Promoting Policies under Household Heterogeneity, Redistribution and General Equilibrium Effects

We construct a dynamic general equilibrium model to assess the effects of three standard fertility-promoting policies: (i) transfer payment, (ii) paid maternity leave, and (iii) public childcare service. The evaluation is based on fertility promotion and welfare loss. To introduce heterogeneity, we assume two types of households: the first type has lower productivity and likes children relative to consumption more than the second type does. Heterogeneity, redistribution, and general equilibrium effects are the primary factors influencing policy outcomes. Heterogeneity causes the decisions of the two household types to interact, altering convergence paths and extending the time required for convergence. Moreover, heterogeneity is a critical factor making public childcare service more beneficial for the second type. Redistribution consistently benefits the first type more under any policy, particularly under the transfer payment. General equilibrium effects slightly weaken the fertility-promoting impact of policies and increase welfare losses, a conclusion that holds uniformly across all policies and households. JEL Classification: H31, I38, J11, J13