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The Pay-as-you-go Pension System as a Fertility Insurance and Enforcement Device Author info | Abstract | Publisher info | Download info | Related research | Statistics Hans-Werner Sinn ()
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It is argued that a PAYGO system may have useful allocative functions in that it serves as an insurance against not having children and as enforcement device for "rotten kids" who are unwilling to pay their parents a pension. It is true that the system has a moral hazard effect in terms of reducing the investment in human capital, but, if it is run on a sufficiently small scale, this effect will not be strong enough to prevent a welfare improvement. If, on the other hand, the scale of the system is so large that parents bequeath some of their pensions to their children, it is overdrawn and creates unnecessarily strong disincentives for human capital investment.
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Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number
CESifo Working Paper No. 154.
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Find related papers by JEL classification: H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
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