Childlessness, child allowance policy, and economic growth: can childcare support policies be beneficial for all households?

Abstract Many developed economies face declining fertility rates and aging populations, driven significantly by the rising prevalence of childless households. This paper extends a simple overlapping generations (OLG) model to examine how this trend affects household utility. By assuming heterogeneous preferences for child-rearing, the model treats the proportion of childless households as endogenous, determined by utility maximization. The analysis reveals that an increase in childlessness generally exerts a negative impact on overall household utility. Furthermore, the study evaluates childcare support policies, balancing the distortionary effects of higher taxes against the benefits of reduced rearing costs and enhanced social security from a larger future workforce. Numerical simulations suggest that while most households favor the introduction of childcare support, their preferred tax rates vary significantly. These findings highlight the complex trade-offs in policy design when addressing demographic shifts through fiscal interventions.