Aging, myopia and the pay-as-you-go public pension systems of the G7: a bright future?
AbstractThe public pension systems of the G7 countries were established in an era when the number of contributors far outweighed the number of beneficiaries. Now, for each beneficiary there are fewer contributors, and this trend is projected to accelerate. To evaluate the prospects for these economies we develop an overlapping generations model where growth is endogenously fueled by investments in physical and human capital. We analyze individuals' behavior when their expectations over their length of life are rational or myopic and examine whether policies exist that can offset the effects of aging, should they be adverse. We find that while perfectly anticipated aging is welfare improving and does not threaten the solvency of public pension systems, myopia worsens welfare, puts pension systems at risk, and cannot be easily remedied by public policy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2000-015.
Date of creation: 2003
Date of revision:
Other versions of this item:
- Rowena A. Pecchenino & Patricia S. Pollard, 2005. "Aging, Myopia, and the Pay-As-You-Go Public Pension Systems of the G7: A Bright Future?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(3), pages 449-470, 08.
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.:
- Poterba, James M, 1988. "Are Consumers Forward Looking? Evidence from Fiscal Experiments," American Economic Review, American Economic Association, vol. 78(2), pages 413-18, May.
- Laitner, John & Juster, F Thomas, 1996.
"New Evidence on Altruism: A Study of TIAA-CREF Retirees,"
American Economic Review,
American Economic Association, vol. 86(4), pages 893-908, September.
- John Laitner & F. Thomas Juster, 1993. "New evidence on altruism: a study of TIAA-CREF retirees," Discussion Paper / Institute for Empirical Macroeconomics 86, Federal Reserve Bank of Minneapolis.
- Ehrlich, Isaac & Lui, Francis T, 1991. "Intergenerational Trade, Longevity, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1029-59, October.
- Rowena A. Pecchenino & Patricia S. Pollard, 2000.
"Dependent children and aged parents: funding education and social security in an aging economy,"
1995-001, Federal Reserve Bank of St. Louis.
- Pecchenino, Rowena A. & Pollard, Patricia S., 2002. "Dependent children and aged parents: funding education and social security in an aging economy," Journal of Macroeconomics, Elsevier, vol. 24(2), pages 145-169, June.
- Feldstein, Martin & Liebman, Jeffrey B., 2002.
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324
- Martin Feldstein, 1982.
"The Optimal Level of Social Security Benefits,"
NBER Working Papers
0970, National Bureau of Economic Research, Inc.
- Pecchenino, R.A., 1994.
"Social Security, Social Welfare and the Aging Population,"
9403, Michigan State - Econometrics and Economic Theory.
- Kelvin R. Utendorf & Rowena A. Pecchenino, 1999. "Social security, social welfare and the aging population," Journal of Population Economics, Springer, vol. 12(4), pages 607-623.
- Michele Boldrin, 1993.
"Public Education and Capital Accumulation,"
9301, Centro de Investigacion Economica, ITAM.
- Michele Boldrin, 2005. "Public Education and Capital Accumulation," Levine's Bibliography 172782000000000090, UCLA Department of Economics.
- Michele Boldrin, 1992. "Public Education and Capital Accumulation," Discussion Papers 1017, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kaganovich, Michael & Zilcha, Itzhak, 1999.
"Education, social security, and growth,"
Journal of Public Economics,
Elsevier, vol. 71(2), pages 289-309, February.
- 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.
- Nishimura, K. & Zhang, J., 1990. "Pay-As-You-Go Public Pensions With Endogenous Fertility," Papers 202, Australian National University - Department of Economics.
- Ben S. Bernanke & Refet S. Gurkaynak, 2001.
"Is Growth Exogenous? Taking Mankiw, Romer and Weil Seriously,"
NBER Working Papers
8365, National Bureau of Economic Research, Inc.
- Ben S. Bernanke & Refet S. Gürkaynak, 2002. "Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 11-72 National Bureau of Economic Research, Inc.
- Cremer, H. & Kessler, D. & Pestieau, P., 1989.
"Intergenerational Transfers Within The Family,"
CORE Discussion Papers
1989018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Alan J. Auerbach & Laurence J. Kotlikoff & Robert P. Hagemann & Giuseppe Nicoletti, 1989. "The Economic Dynamics of an Ageing Population: The Case of Four OECD Countries," OECD Economics Department Working Papers 62, OECD Publishing.
- Antonio Rangel & Richard Zeckhauser, 2001.
"Can Market and Voting Institutions Generate Optimal Intergenerational Risk Sharing?,"
in: Risk Aspects of Investment-Based Social Security Reform, pages 113-152
National Bureau of Economic Research, Inc.
- Antonio Rangel & Richard Zeckhauser, 1999. "Can Market and Voting Institutions Generate Optimal Intergenerational Risk Sharing?," NBER Working Papers 6949, National Bureau of Economic Research, Inc.
- Antonio Rangel & Richard Zeckhauser, 1999. "Can Market and Voting Institutions Generate Optimal Intergenerational Risk Sharing?," Working Papers 99003, Stanford University, Department of Economics.
- Paul R. Masson & Ralph W. Tryon, 1990.
"Macroeconomic Effects of Projected Population Aging in Industrial Countries,"
IMF Staff Papers,
Palgrave Macmillan, vol. 37(3), pages 453-485, September.
- Paul R. Masson & Ralph W. Tryon, 1990. "Macroeconomic Effects of Prelected Population Aging in Industrial Countries," IMF Working Papers 90/5, International Monetary Fund.
- Sheetal K. Chand & Albert Jaeger, 1996. "Aging Populations and Public Pension Schemes," IMF Occasional Papers 147, International Monetary Fund.
- Deborah Roseveare & Willi Leibfritz & Douglas Fore & Eckhard Wurzel, 1996. "Ageing Populations, Pension Systems and Government Budgets: Simulations for 20 OECD Countries," OECD Economics Department Working Papers 168, OECD Publishing.
- Brugiavini, Agar, 1993. "Uncertainty resolution and the timing of annuity purchases," Journal of Public Economics, Elsevier, vol. 50(1), pages 31-62, January.
- Ketil Hviding & Marcel Mérette, 1998. "Macroeconomic Effects of Pension Reforms in The Context of Ageing Populations: Overlapping Generations Model Simulations for Seven OECD Countries," OECD Economics Department Working Papers 201, OECD Publishing.
- Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, vol. 28(2), pages 565-637, June.
- Hubbard, R Glenn & Judd, Kenneth L, 1987. "Social Security and Individual Welfare: Precautionary Saving, Borrowing Constraints, and the Payroll Tax," American Economic Review, American Economic Association, vol. 77(4), pages 630-46, September.
- Sheng-Cheng Hu, 1996. "Myopia and Social Security Financing," Public Finance Review, , vol. 24(3), pages 319-348, July.
- Cigno, Alessandro & Rosati, Furio C., 1996. "Jointly determined saving and fertility behaviour: Theory, and estimates for Germany, Italy, UK and USA," European Economic Review, Elsevier, vol. 40(8), pages 1561-1589, November.
- Docquier, Frederic & Michel, Philippe, 1999. " Education Subsidies, Social Security and Growth: The Implications of a Demographic Shock," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(3), pages 425-40, September.
- Barro, Robert J., 1974.
"Are Government Bonds Net Wealth?,"
3451399, Harvard University Department of Economics.
- Fanti, Luciano & Gori, Luca, 2010. "Increasing PAYG pension benefits and reducing contribution rates," Economics Letters, Elsevier, vol. 107(2), pages 81-84, May.
- repec:ebl:ecbull:v:10:y:2008:i:2:p:1-8 is not listed on IDEAS
- Luciano Fanti & Luca Gori, 2013.
"Fertility-related pensions and cyclical instability,"
Journal of Population Economics,
Springer, vol. 26(3), pages 1209-1232, July.
- Fanti, Luciano & Gori, Luca, 2010. "Fertility-related pensions and cyclical instability," MPRA Paper 20221, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao).
If references are entirely missing, you can add them using this form.