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Herman Schwartz (University of Virginia)

24 October 2013 @ 14:00

 

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Date:
24 October 2013
Time:
14:00
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“Babies, Bonds, and Buildings: Policy Implications of the Links among Pensions, Housing Finance Systems and Fertility Rates”

abstract

Many rich OECD countries now have fertility rates well below the replacement rate. Low fertility implies declining population and potential problems for pension systems trying to finance an ever-rising ratio of retirees to workers. Additionally, surveys show that the average couple in the rich OECD desires more children than they actually have. Most analyses of this situation look at employment policies – the ‘babies and bosses’ arena – as the key variable affecting people’s, and especially mothers’, ability to balance work and life in ways that promote higher fertility rates. The babies and bosses approach to a policy solution is valid. However an equally important set of issues prior to babies and bosses affects fertility. Babies and bosses issues arise after household formation. Liquid housing finance systems funding debt-financed owner occupied or rental housing create cheap housing, and thus earlier household formation. Earlier household formation leads to higher fertility rates, because couples that start having children earlier tend to have more children. The debt created in liquid housing finance markets historically showed up on private pension funds’ balance sheets as assets. Fertility, housing finance, and pension systems are thus linked together in ways amenable to policy interventions. I  examine the relationships among housing finance, pension systems and fertility in the rich OECD countries so as to suggest possible policy interventions that might enable couples to attain their preferred fertility outcomes.