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Pensions with heterogenous individuals and endogenous fertility

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  • CREMER, Helmuth
  • GAHVARI, Firouz
  • PESTIEAU, Pierre

Abstract

This paper studies the design of pension schemes in a society where fertility is endogenous and parents differ in their ability to raise children. In a world with perfect information, a pay-as-you-go social security system is characterized by equal pensions for all but different contributions which may or may not increase with the number of children. Additionally, fertility must be subsidized at the margin to correct for the externality that accompanies fertility. In a world of asymmetric information, incentive-related distortions supplement the Pigouvian subsidy. These may either require an additional subsidy or an offsetting tax on fertility depending on whether the redistribution is towards people with more or less children. In the former case, pensions are decreasing in the number of children; in the latter case, they are increasing."

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006015.

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Date of creation: 00 Feb 2006
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Handle: RePEc:cor:louvco:2006015

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References

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  1. 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.
  2. Helmut Cremer & Firouz Gahvari & Pierre Pestieau, 2006. "Pensions with endogenous and stochastic fertility," Working Papers 22594, Institut National de la Recherche Agronomique, France.
  3. G. ABIO & Géraldine MAHIEU & C. Patxot, 2002. "On the Optimality of PAYG Pension Systems in an Endogenous Fertility Setting," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002006, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  4. 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.
  5. 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.
  6. 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.
  7. Bental, Benjamin, 1989. "The Old Age Security Hypothesis and Optimal Population Growth," Journal of Population Economics, Springer, vol. 1(4), pages 285-301.
  8. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2004. "Hidden information problems in the design of family allowances," Journal of Population Economics, Springer, vol. 17(4), pages 645-655, December.
  9. Robert Fenge & Volker Meier, 2003. "Pensions and Fertility Incentives," CESifo Working Paper Series 879, CESifo Group Munich.
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Citations

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Cited by:
  1. Helmuth Cremer & Firouz Gahvari & Pierre Pestieau, 2009. "Fertility, Human Capital Accumulation, and the Pension System," CESifo Working Paper Series 2736, CESifo Group Munich.
  2. Cremer, Helmuth & Gahvari, Firouz & Pestieau, Pierre, 2006. "Pensions with endogenous and stochastic fertility," Journal of Public Economics, Elsevier, vol. 90(12), pages 2303-2321, December.
  3. PESTIEAU, Pierre & PONTHIÈRE, Grégory & SATO, Motohiro, 2006. "Longevity and Pay-as-you-Go pensions," CORE Discussion Papers 2006054, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Vincenzo Galasso & Roberta Gatti & Paola Profeta, 2009. "Investing for the old age: pensions, children and savings," International Tax and Public Finance, Springer, vol. 16(4), pages 538-559, August.
  5. PESTIEAU, Pierre & PONTHIERE, Grégory, 2011. "Childbearing age, family allowances and social security," CORE Discussion Papers 2011059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Meier, Volker & Wrede, Matthias, 2010. "Pensions, fertility, and education," Journal of Pension Economics and Finance, Cambridge University Press, vol. 9(01), pages 75-93, January.
  7. Bas Groezen & Lex Meijdam, 2008. "Growing old and staying young: population policy in an ageing closed economy," Journal of Population Economics, Springer, vol. 21(3), pages 573-588, July.
  8. Tatsuya Omori, 2009. "Effects of public education and social security on fertility," Journal of Population Economics, Springer, vol. 22(3), pages 585-601, July.
  9. 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].
  10. Yew, Siew Ling & Zhang, Jie, 2013. "Socially optimal social security and education subsidization in a dynastic model with human capital externalities, fertility and endogenous growth," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 154-175.

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