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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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  • ROWENA A. PECCHENINO
  • PATRICIA S. POLLARD

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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Bibliographic 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:
  1. Fanti, Luciano & Gori, Luca, 2010. "Increasing PAYG pension benefits and reducing contribution rates," Economics Letters, Elsevier, vol. 107(2), pages 81-84, May.
  2. Luciano Fanti & Luca Gori, 2013. "Fertility-related pensions and cyclical instability," Journal of Population Economics, Springer, vol. 26(3), pages 1209-1232, July.
  3. repec:ebl:ecbull:v:10:y:2008:i:2:p:1-8 is not listed on IDEAS

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