The main aim of this paper is to study the impact on birth rate of specific public policies: subsidies to chilbearing and public consumption. The analysis is framed in an developed economy in which fertility choices and economic decisions are interconnected. In particular, the study relies on overlapping generations, habit formation in consumption and endogenous fertility rate. This last factor is directly explained by the preference for children, the economic capacity of young people and the stylized fact of unemployment. The outcome is a versatile system dynamics model that is adapted for the Portuguese economy from 2000 to 2011. Two counterfactual exercises differentiated from the employment distribution but with identical alternatives of public spending are implemented in the simulation model. The results show two divergent aspects: the births do not vary if the public consumption increases but, the births increase when the costs of childrearing are subsidized even if the public consumption is high. These results also indicate that the subsidies are not sufficient to curb the decreasing trend of births. In addition to them, it is required a sustainable economic growth.
In the last decades in several mature democracies the problem of debt emerged as a violation of intergenerational equal treatment due to high expenditures concentration and dilution of costs by mean of debt creation. So far this issue has been analyzed from a statistical and a socio-economic perspective, which identified the high political interference as the main dysfunction of country debt management. There are no studies which frame the issue by focusing on State institutions as performance-oriented organizations, according to this perspective such organizations have to respect dynamically trade-off between development and the debt reduction through a mix of levers such as: funds acquisition/reduction, interest rate and financial leverage. System dynamics can be successfully used as an instrument to support Government in keeping control over the key variables affecting debt changes and implementing a sustainable policy. In the paper three kinds of policies are recommended: the reduction of expenses and increase of receipts in the short term to drastically reduce the debt amount; the opportunity to exploit the financial leverage in the long term. Such approach implies a change of perspective, looking at Italy as a performance-oriented organization in which a proper financial management serves economic development and not vice versa.