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Aging, Myopia, and the Pay-As-You-Go Public Pension Systems of the G7: A Bright Future?

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Author Info
ROWENA A. PECCHENINO
PATRICIA S. POLLARD

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Abstract

Public pension systems of the G7 countries were established in an era when contributors far outnumbered beneficiaries. Now, for each beneficiary there are fewer contributors, and this trend is projected to accelerate. To evaluate the prospects for these economies we develop an endogenous growth overlapping generations model. We analyze individuals' behavior when their expectations regarding longevity are rational or myopic, and examine whether policies exist that can offset any adverse effects of aging. We find that while perfectly anticipated aging is welfare improving, myopia worsens welfare, puts pension systems at risk, and cannot be easily remedied by public policy. Copyright 2005 Blackwell Publishing Inc..

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9779.2005.00212.x
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Publisher Info
Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 7 (2005)
Issue (Month): 3 (08)
Pages: 449-470
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Handle: RePEc:bla:jpbect:v:7:y:2005:i:3:p:449-470

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Luciano Fanti & Luca Gori, 2008. "Longevity and PAYG pension systems sustainability," Economics Bulletin, Economics Bulletin, vol. 10(2), pages 1-8. [Downloadable!]
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