Changing demography by changing democracy: Welfare and fertility under proxy voting for children

Proxy voting on behalf of children (also known as Demeny voting) has been proposed as a measure to contrast demographic decline in low-fertility countries. We study the effects of Demeny voting on fertility and budget allocation in the context of a probabilistic voting model. Citizens can vote to allocate the budget between either the production of a public good that results in immediate benefits for the present generation, or investment in a futureoriented public good that benefits the productivity of newborn children and society as a whole over time. Fertility is endogenous and disagreements arise between parents and nonparents over public spending. We show that proxy voting, by acting as a commitment device towards pro-children policies, increases fertility, future-oriented spending, such as early childhood investment and universal child care, and, under some conditions, increases long-term welfare for non-parents, thereby generating a Pareto improvement.