Old-age support and demographic change in developing countries. A cultural transmission model

Javier Olivera, Katholieke Universiteit Leuven

We model intergenerational old-age support within the context of a developing country that faces demographic changes: declining fertility and increasing life expectancy. We attempt to answer if agents will be able to support their parents during the next generations and under what conditions. For this purpose we use a three period overlapping generations model and a cultural transmission process, in which agents may be socialized to different cultural family models (old-age supporters and non-supporters). As life expectancy increases, we find conditions under which a reduced fertility rate is compatible with the expectation to be supported during old-age. This offers an additional explanation for persistency of family old-age support in developing countries with demographic change.