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Pension Design when Fertility Fluctuates: The Role of Capital Mobility and Education Financing

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Author Info
Jovan Zamac ()

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Abstract

This study compares alternative designs of an unfunded pension system. Convex combinations between a fixed contribution rate and a fixed benefit rate are considered. The objective is to maximize the expected ex-ante welfare under stochastic fertility. The model is a three-period CGE framework where the design of the education system and effects on factor prices are accounted for. The effects on factor prices depend on the degree of capital mobility. For low degrees of capital mobility it is optimal to have a fixed benefit rate in the pension system. But for the small open economy, a fixed contribution rate is optimal if the education system has a fixed benefit rate. This design of education and pension systems assures that individuals in the small open economy are unaffected by fertility fluctuations.

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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 1569.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1569

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Related research
Keywords: pension schemes demography social security education fertility

Find related papers by JEL classification:
H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
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

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  1. Michele Boldrin & Ana Montes, 2005. "The Intergenerational State Education and Pensions," Review of Economic Studies, Blackwell Publishing, vol. 72(3), pages 651-664, 07. [Downloadable!] (restricted)
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  2. Maurice Obstfeld & Kenneth Rogoff, 2000. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Working Papers 7777, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Boadway, Robin & Marchand, Maurice & Pestieau, Pierre, 1991. "Pay-as-You-Go Social Security in a Changing Environment," Journal of Population Economics, Springer, vol. 4(4), pages 257-80, November.
    Other versions:
  4. Laurence J. Kotlikoff & Lawrence H. Summers, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," NBER Working Papers 0445, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Assar Lindbeck, 2000. "Pensions and Contemporary Socioeconomic Change," NBER Working Papers 7770, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Cutler, D.M. & Poterba, J.M. & Sheiner, L.M. & Summers, L.H., 1990. "An Aging Society: Opportunity Or Challenge," Working papers 553, Massachusetts Institute of Technology (MIT), Department of Economics.
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  7. ûystein ThÛgersen, 1998. "A note on intergenerational risk sharing and the design of pay-as-you-go pension programs," Journal of Population Economics, Springer, vol. 11(3), pages 373-378. [Downloadable!] (restricted)
  8. Antonio Rangel, 2003. "Forward and Backward Intergenerational Goods: Why Is Social Security Good for the Environment?," American Economic Review, American Economic Association, vol. 93(3), pages 813-834, June. [Downloadable!] (restricted)
  9. Smith, Alasdair, 1982. "Intergenerational transfers as social insurance," Journal of Public Economics, Elsevier, vol. 19(1), pages 97-106, October. [Downloadable!] (restricted)
  10. Zamac , Jovan, 2005. "Winners and Losers from a Demographic Shock under Different Intergenerational Transfer Schemes," Working Paper Series 2005:13, Uppsala University, Department of Economics. [Downloadable!]
  11. Blomquist, N.S. & Wijkander, H., 1993. "Fertility Waves, Aggregate Savings and the Rate of Interest," Papers 1993-9, Uppsala - Working Paper Series.
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  12. repec:fth:harver:1490 is not listed on IDEAS
  13. Becker, Gary S & Murphy, Kevin M, 1988. "The Family and the State," Journal of Law & Economics, University of Chicago Press, vol. 31(1), pages 1-18, April.
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  14. Schmitt-Grohe, Stephanie & Uribe, Martin, 2003. "Closing small open economy models," Journal of International Economics, Elsevier, vol. 61(1), pages 163-185, October. [Downloadable!] (restricted)
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  15. David Card & Alan Krueger, 1990. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," NBER Working Papers 3358, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Laurence Ball & N. Gregory Mankiw, 2001. "Intergenerational Risk Sharing in the Spirit of Arrow, Debreu, and Rawls, with Applications to Social Security Design," NBER Working Papers 8270, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Hassler, J. & Lindbeck, A., 1997. "Intergenerational Risk Sharing, Stability and Optimality of Alternative Pension Systems," Papers 493, Industrial Institute for Economic and Social Research.
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  18. Blanchet, Didier & Kessler, Denis, 1991. "Optimal Pension Funding with Demographic Instability and Endogenous Returns on Investment," Journal of Population Economics, Springer, vol. 4(2), pages 137-54, May.
  19. Andreas Wagener, 2003. "Pensions as a portfolio problem: fixed contribution rates vs. fixed replacement rates reconsidered," Journal of Population Economics, Springer, vol. 16(1), pages 111-134, 02. [Downloadable!] (restricted)
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