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Social Security and Demographic Trends: Theory and Evidence from the International Experience

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Author Info

  • Isaac Ehrlich

    (SUNY Buffalo)

  • Jinyoung Kim

    (SUNY Buffalo)

Abstract

The worldwide problem with pay-as-you-go, defined-benefits social security systems isn't just financial. Through a dynamic, overlapping-generations model where forming a family and bearing and educating children are choice variables, we show that social security taxes and benefits generate incentives to reduce both family formation and fertility, and that these effects cannot be fully neutralized by counteracting inter-temporal or intergenerational transfers within families. We implement the model using calibrated simulations as well as panel data from 57 countries over 32 years. We find that PAYG tax measures account for a non-trivial part of the downward trends in family formation and fertility worldwide, especially in OECD countries. (Copyright: Elsevier)

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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 10 (2007)
Issue (Month): 1 (January)
Pages: 55-77

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Handle: RePEc:red:issued:05-22

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Related research

Keywords: Social security; Family; Human capital; Marriage; Divorce; Fertility; Saving; Growth; Public pension; Pay-as-you-go;

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References

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  1. Robert J. Barro & Jong-Wha Lee, 1993. "International Comparisons of Educational Attainment," NBER Working Papers 4349, National Bureau of Economic Research, Inc.
  2. Michael Baker & Emily Hanna & Jasmin Kantarevic, 2004. "The Married Widow: Marriage Penalties Matter!," Journal of the European Economic Association, MIT Press, MIT Press, vol. 2(4), pages 634-664, 06.
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  4. Barro, Robert J. & Lee, Jong-Wha, 2005. "IMF programs: Who is chosen and what are the effects?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 52(7), pages 1245-1269, October.
  5. Casey B Mulligan, 1999. "Gerontocracy, Retirement, and Social Security," University of Chicago - George G. Stigler Center for Study of Economy and State, Chicago - Center for Study of Economy and State 154, Chicago - Center for Study of Economy and State.
  6. Boadway, R.W. & Wildasin, D.E., 1987. "A median voter model of social security," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1987014, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Juan A. Rojas, 2003. "On The Interaction Between Education And Social Security," Economics Working Papers we033511, Universidad Carlos III, Departamento de Economía.
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  9. Michele Boldrin & Mariacristina De Nardi & Larry E. Jones, 2005. "Fertility and Social Security," NBER Working Papers 11146, National Bureau of Economic Research, Inc.
  10. Michele Boldrin & Aldo Rustichini, 2000. "Political Equilibria with Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 41-78, January.
  11. Becker, Gary S, 1993. "Nobel Lecture: The Economic Way of Looking at Behavior," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(3), pages 385-409, June.
  12. Cigno, Alessandro & Rosati, Furio C., 1996. "Jointly determined saving and fertility behaviour: Theory, and estimates for Germany, Italy, UK and USA," European Economic Review, Elsevier, Elsevier, vol. 40(8), pages 1561-1589, November.
  13. Isaac Ehrlich & Jinyoung Kim, 2005. "Social Security, Demographic Trends, and Economic Growth: Theory and Evidence from the International Experience," NBER Working Papers 11121, National Bureau of Economic Research, Inc.
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  1. Branislav Žúdel autorom Kriteka: Nerušme dôchodkovú reformu
    by Kriteko in Kritická ekonómia on 2010-12-20 08:14:14
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Cited by:
  1. Isaac Ehrlich & Jinyoung Kim, 2007. "Has Social Security Influenced Family Formation and Fertility in OECD Countries? An Economic and Econometric Analysis," NBER Working Papers 12869, National Bureau of Economic Research, Inc.
  2. Gugushvili, Alexi, 2007. "Giving the ageing of the population how can countries afford pay-as-you-go social insurance pensions?," MPRA Paper 2869, University Library of Munich, Germany.
  3. Jellal, Mohamed & Bouzahzah, Mohamed, 2012. "Social security family finance and demography," MPRA Paper 38793, University Library of Munich, Germany.
  4. Galasso, Vincenzo & Gatti, Roberta & Profeta, Paola, 2008. "Investing for the old age : pensions, children and savings," Social Protection Discussion Papers 47101, The World Bank.
  5. Erasmo Papagni, 2008. "The Long-run Effects of Household Liquidity Constraints and Taxation on Fertility, Education, Saving, and Growth," Discussion Papers, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy 11_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
  6. Torberg Falch & Justina A.V. Fischer, 2008. "Does a Generous Welfare State Crowd out Student Achievement? Panel Data Evidence from International Student Tests," CESifo Working Paper Series 2383, CESifo Group Munich.
  7. Filoso, Valerio & Papagni, Erasmo, 2010. "Fertility Choice and Financial Development," MPRA Paper 25930, University Library of Munich, Germany.
  8. Justina Fischer & Torberg Falch, 2008. "Does a generous welfare state crowd out student effort? Panel data evidence from international student tests," TWI Research Paper Series, Thurgauer Wirtschaftsinstitut, Universität Konstanz 25, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
  9. Ludwig, Alexander & Schelkle, Thomas & Vogel, Edgar, 2010. "Demographic Change, Human Capital and Welfare," MEA discussion paper series, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy 10196, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  10. Hans-Werner Sinn, 2013. "Das demographische Defizit – die Fakten, die Folgen, die Ursachen und die Politikimplikationen," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 66(21), pages 03-23, November.
  11. Falch, Torberg & Fischer, Justina AV, 2011. "Welfare state generosity and student performance: Evidence from international student tests," MPRA Paper 35269, University Library of Munich, Germany.
  12. Aoki, Takaaki, 2008. "On the Implications of Two-way Altruism in Human-Capital-Based OLG Model," MPRA Paper 12492, University Library of Munich, Germany.
  13. Alexander Ludwig & Thomas Schelkle & Edgar Vogel, 2011. "Online Appendix to "Demographic Change, Human Capital and Welfare"," Technical Appendices, Review of Economic Dynamics 08-168, Review of Economic Dynamics.

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