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How Sustainable Are Old-age Pensions in a Shrinking Population with Endogenous Labour Supply?

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Author Info
Pedro Cardoso
Bernard M.S. van Praag ()

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Abstract

In this paper we model an OLG-economy where labour supply is endogenously determined and where we assume that there are two pension systems, namely, a pay-as-you-go system and a funded system. The main question is whether there is an equilibrium involving an old-age pensions system, partly financed by PAYG and partly by a capital reserve system, and what will be the size and the composition of the pension income. We also look at the consequences of increasing preference for leisure on the design of the pension system. We assume the population growth rate and the technological growth rate to be endogenous; they are assumed to be correlated with the labour supply. Negative population growth is admitted for by the model. The main conclusion is that there is in any economy an equilibrium, but that the numerical outcomes heavily depend on the attitude towards leisure and the capital production elasticity

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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 861.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_861

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Related research
Keywords: ageing labour supply old-age pensions pay-as-you-go

Find related papers by JEL classification:
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Lex Meijdam & Harrie A. A. Verbon, 1996. "Aging and political decision making on public pensions," Journal of Population Economics, Springer, vol. 9(2), pages 141-158.
  2. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467. [Downloadable!] (restricted)
  3. Thomas F. Cooley & Jorge Soares, 1999. "A Positive Theory of Social Security Based on Reputation," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 135-160, February. [Downloadable!] (restricted)
  4. Meijdam, Lex & Verbon, Harrie A A, 1996. "Aging and Political Decision Making on Public Pensions," Journal of Population Economics, Springer, vol. 9(2), pages 141-58, May.
  5. Breyer, Friedrich, 1994. "The political economy of intergenerational redistribution," European Journal of Political Economy, Elsevier, vol. 10(1), pages 61-84, May. [Downloadable!] (restricted)
  6. Phillip Swagel & Efraim Sadka & Assaf Razin, 2002. "The Aging of the Population and the Size of the Welfare State," IMF Working Papers 02/68, International Monetary Fund. [Downloadable!]
  7. Raffelhuschen, Bernd & Risa, Alf Erling, 1995. "Reforming social security in a small open economy," European Journal of Political Economy, Elsevier, vol. 11(3), pages 469-485, September. [Downloadable!] (restricted)
  8. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2003. "Voting on Pensions with Endogenous Retirement Age," CEPR Discussion Papers 3778, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Michel, P. & Pertieau, P., 1999. "Social Security and Early Retirement in an Overlapping-Generations Growth Model," Papers 9951, Catholique de Louvain - Center for Operations Research and Economics.
  10. Friedrich Breyer & Klaus Stolte, 2000. "Demographic Change, Endogenous Labor Supply and the Political Feasibility of Pension Reform," Discussion Papers of DIW Berlin 202, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  11. Nishimura, Kazuo & Zhang, Junsen, 1992. "Pay-as-you-go public pensions with endogenous fertility," Journal of Public Economics, Elsevier, vol. 48(2), pages 239-258, July. [Downloadable!] (restricted)
    Other versions:
  12. Michele Boldrin & Aldo Rustichini, 2000. "Political Equilibria with Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 41-78, January. [Downloadable!] (restricted)
  13. Miles, David, 1999. "Modelling the Impact of Demographic Change upon the Economy," Economic Journal, Royal Economic Society, vol. 109(452), pages 1-36, January. [Downloadable!] (restricted)
    Other versions:
  14. Lettau, Michael K., 1997. "Compensation in part-time jobs versus full-time jobs What if the job is the same?," Economics Letters, Elsevier, vol. 56(1), pages 101-106, September. [Downloadable!] (restricted)
  15. Samuelson, Paul A, 1975. "Optimum Social Security in a Life-Cycle Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 539-44, October. [Downloadable!] (restricted)
  16. Assaf Razin & Efraim Sadka & Phillip Swagel, 2002. "The Aging Population and the Size of the Welfare State," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 900-918, August. [Downloadable!] (restricted)
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  17. Galasso, Vincenzo & Profeta, Paola, 2002. "The political economy of social security: a survey," European Journal of Political Economy, Elsevier, vol. 18(1), pages 1-29, March. [Downloadable!] (restricted)
  18. Martin Kolmar, 1997. "Intergenerational redistribution in a small open economy with endogenous fertility," Journal of Population Economics, Springer, vol. 10(3), pages 335-356. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kooreman, Peter, 2003. "Time, Money, Peers, and Parents: Some Data and Theories on Teenage Behavior," IZA Discussion Papers 931, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Marie-Laure Michaud, 2004. "Welfare and the Labour Market in the EU," Occasional Papers 07, European Network of Economic Policy Research Institutes. [Downloadable!]
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