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Pensions with endogenous and stochastic fertility

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Author Info
CREMER, Helmuth
PESTIEAU, Pierre
GAHVARI, Firouz

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Abstract

This paper studies the design of a pay-as-you-go social security system in a society where fertility is in part stochastic and in part determined through capital investment. If parents' investments in children are publicly observable, pension benefits must be linked positively to the the level of investment, and payroll taxes negatively to the number of children. The outcome is characterized by full insurance with all parents, regardless of their number of children, enjoying identical consumption levels. Without observability, benefits must increase, and payroll taxes decrease, with the number of children. The second-best level of investment in children, and the resulting average fertility rate, are less than their corresponding first-best levels.

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Publisher Info
Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004067.

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Date of creation: 01 Sep 2004
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Handle: RePEc:cor:louvco:2004067

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Related research
Keywords: pay-as-you-go social security; endogenous fertility; storage; moral hazard; SamuelsonÕs condition;

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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

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. Cremer, Helmuth & Gahvari, Firouz & Pestieau, Pierre, 2004. "Pensions with Heterogenous Individuals and Endogenous Fertility," IDEI Working Papers 313, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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  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. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1335-1357, July. [Downloadable!] (restricted)
  4. Robert Fenge & Volker Meier, 2005. "Pensions and fertility incentives," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 28-48, February. [Downloadable!] (restricted)
    Other versions:
  5. Cigno, Alessandro & Luporini, Annalisa & Pettini, Anna, 2003. "Transfers to families with children as a principal-agent problem," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1165-1177, May. [Downloadable!] (restricted)
    Other versions:
  6. Bental, Benjamin, 1989. "The Old Age Security Hypothesis and Optimal Population Growth," Journal of Population Economics, Springer, vol. 1(4), pages 285-301.
  7. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Discussion Papers in Economics 938, University of Munich, Department of Economics. [Downloadable!]
  8. van Groezen, Bas & Leers, Theo & Meijdam, Lex, 2003. "Social security and endogenous fertility: pensions and child allowances as siamese twins," Journal of Public Economics, Elsevier, vol. 87(2), pages 233-251, February. [Downloadable!] (restricted)
  9. Helmuth Cremer & Firouz Gahvari & Pierre Pestieau, 2003. "Stochastic fertility, moral hazard, and the design of pay-as-you-go pension plans," DELTA Working Papers 2003-21, DELTA (Ecole normale supérieure). [Downloadable!]
  10. Groezen, B. van & Leers, T. & Meijdam, L., 2000. "Family size, looming demographic changes and the efficiency of social security reform," Discussion Paper 27, Tilburg University, Center for Economic Research. [Downloadable!]
  11. 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. Helmuth Cremer & Firouz Gahvari & Pierre Pestieau, 2008. "Pensions with heterogenous individuals and endogenous fertility," Journal of Population Economics, Springer, vol. 21(4), pages 961-981, October. [Downloadable!] (restricted)
    Other versions:
  2. David E. Bloom & David Canning & Günther Fink & Jocelyn E. Finlay, 2008. "Demographic Change, Institutional Settings, and Labor Supply," PGDA Working Papers 4208, Program on the Global Demography of Aging. [Downloadable!]
  3. 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. [Downloadable!]
  4. Volker Meier & Matthias Wrede, 2005. "Pension, Fertility, and Education," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  5. Giam Pietro Cipriani & Miltiadis Makris, 2009. "PAYG Pensions and Human Capital Accumulation: Some Unpleasant Arithmetic," CHILD Working Papers wp19_09, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY. [Downloadable!]
  6. Gaggermeier, Christian, 2006. "Pension and children : Pareto improvement with heterogeneous preferences," IAB Discussion Paper 200603, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
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