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The Family, the Market, and the State in Ageing Societies.

The papers in this volume were originally presented at a 1988 seminar organized by the International Union for the Scientific Study of Population in Sendal, Japan. There are two organizing themes: five papers examine the influence of market forces and the state on various aspects of family formation. The four papers in the second half of the volume deal with intergenerational resource transfers.

Robert Willis and Robert Michael study cohabitation in the United States. Cohabitation without formal marriage has become more frequent over the past two decades but has not been extensively studied. Willis and Michael study a 1985 sample of 32 year olds. They find that most cohabiting couples do so for a relatively short period of time and that most cohabitations end in marriage. In effect cohabitation is a trial marriage. The authors propose that couples choose cohabitation rather than formal marriage as a way of dealing with uncertainty. While cohabiting, the partners gather information intensively, and once the uncertainty is resolved, they either formally marry or dissolve the relationship at lower cost that the cost of dissolving a formal marriage. Among the results is that men are more likely to cohabit rather than marry formally when their labor market prospects are relatively poor. Women, on the other hand, are more likely to cohabit rather than marry when their labor market prospects are relatively good.

David Lam and Theodore Bergstrom propose a model with which they study the effect of the demographic cycle on Swedish marriage patterns. They assume that choice of a spouse is motivated by a preferred age difference between husbands and wives. Deviations from this preferred age difference impose a penalty on individuals. There were significant over-time fluctuations in Swedish birth rates in 1895-1945. Given a preferred age difference between spouses, such fluctuations in birth rates make it more difficult to find a spouse with the preferred age difference. Lam and Bergstrom propose a linear programming algorithm to study this "marriage squeeze." Their model predicts the age difference of spouses well for the period 1915-1925, a period of extreme fluctuations in the sex ratio with a three year age difference. Actual age differences and those predicted by their model, however, diverge after 1925.

Alessandro Cigno studies the timing of births. In low fertility populations, changes in the timing of fertility may be the chief way in which changes in labor market conditions affect fertility. Cigno sets up a non-stochastic optimizing model which is more tractable than many of the stochastic models which have been proposed in the literature. His model yields several predictions some of which are supported by the evidence which Cigno has obtained in previous work.

The paper by Didier Blanchet and Olivia Ekert-Jaffe deals with the effect of family benefits (or child-related public subsidies to families) on fertility. Family benefits are common in many European countries. The authors assemble a data set for various European countries over several years. Estimates of an aggregate model indicate that family benefits affect positively the total fertility rate. The paper includes a detailed discussion of family benefits policies in various European countries.

Naohiro Ogawa and Robert Hodge study wages and labor supply of married Japanese women. They use 1988 data and study wage determination and labor force participation using a microeconomic framework. They also study the choice of full time work, part time work, work in a family enterprise or nonparticipation: all are important categories in the Japanese context. The authors pay particular attention to the facilitating role played by residence in a multiple generation household on the labor supply of working age married women.

Ronald Lee studies the effect of changes in fertility and mortality on intergenerational transfers such as public pensions financed by current payroll taxes. He argues that a reduction in fertility or a reduction in mortality are likely to have different effects on life-cycle consumption. A major part of the paper is devoted to modelling mortality change. A reduction in mortality could result in reduced leisure or in reduced consumption and these adjustments could be concentrated in ages that were previously spent in retirement or spread out over all ages. Lee considers the circumstances under which these possible outcomes could occur and decomposes the change in the present value of consumption and leisure into direct and indirect components. He then evaluates these components in the context of stylized examples. This is a thought-provoking paper on a topic that will be of increasing importance over the next several decades.

Andrew Mason, Yoke-Yun Teh, Naohiro Ogawa and Takehiro Fukui construct a macroeconomic model with which they study the intergenerational distribution of resources and income in Japan. They make some simplifying assumptions such as that labor force participation is exogenous which may be unrealistic. The authors find that per capita income in Japanese households is remarkably equally distributed across households of different ages. This is an outcome of the high saving rate and high asset accumulation over the life cycle. They also predict that this pattern will persist into the next century when the average age of the Japanese population is expected to increase.

Tommy Bengtsson and Gunnar Fridlizius offer a historical perspective on intergenerational transfers in Sweden. During the preindustrial period (before 1870), private intergenerational transfers were widespread. Elderly farmers rarely retired entirely but spent much of their old age in semiretirement and relied on private transfer agreements for the rest of their income in old age. As the economy changed with the advent of commercial agriculture and industrialization, this system became untenable. It was progressively replaced by a public pay-as-you-go system which involves complete retirement at a fixed age and which now provides the bulk of retirement income. Increased life expectancy, low fertility and possibly slower economic growth will place strains upon this system. The authors conjecture that private pensions and some work activity by the elderly may again play a role in Swedish intergenerational transfers in future years.

Helmuth Cremer, Denis Kessler and Pierre Pestieau study public and private intergenerational transfers. They present some French data and sketch a three generation model with no altruism and show how equilibrium may differ under different assumptions about generational interactions.

Evangelsos M. Falaris University of Delaware
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Author:Falaris, Evangelos M.
Publication:Southern Economic Journal
Article Type:Book Review
Date:Oct 1, 1995
Words:1031
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