Estimating saving and fertility simultaneously by the VAR method, we find that social security cover has a positive effect on household saving, and a negative effect on fertility. In Germany, as in other countries where the hypothesis was tested, social security is thus good for growth. A possible explanation for this unconventional finding is that compulsory saving in the form of pension contributions tends to displace intra-family transfers, rather than asset formation. However, the negative effect of social security on fertility tends to erode the system's own contributory base, because it reduces the number of future contributors. That is one of the reasons why, in Germany as elsewhere, pay-as-you-go pension systems tend to be financially unstable. To some extent, this is counteracted by child-related benefits, which tend to encourage fertility, but the effect appears to be weak.
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number
CESifo Working Paper No. 394.
Find related papers by JEL classification: C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household 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 J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped
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