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How Should The Allocation Of Resources Adjust To The Baby Bust?

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Author Info
Alexandra Rillaers () (Universidad de Alicante)
David de la Croix (Université Catholique de Louvain)
Geraldine Mahieu (National Bank of Belgium)

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Abstract

We analyze the impact of a drop in fertility on the optimal allocation of resources in an overlapping generations economy where old workers care about leisure. We also characterize optimal dynamics and study the decentralization of the optimum by means of inter-generational transfers and/or public debt. We conclude that the policy recommendations of postponing retirement is fragile and depend on preferences and technologies. Also, even when the optimal adjustment of public debt goes into the expected direction in the long run, -i.e. public debt should decrease,- this may not be the case during the transition.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2003-27.pdf
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File Function: Fisrt version / Primera version, 2003
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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2003-27.

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Length: 38 pages
Date of creation: Aug 2003
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2003-27

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Related research
Keywords: Demographic shock; retirement age; public debt;

Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

References listed on IDEAS
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  1. Marchand, Maurice & Michel, Philippe & Pestieau, Pierre, 1996. "Intergenerational transfers in an endogenous growth model with fertility changes," European Journal of Political Economy, Elsevier, vol. 12(1), pages 33-48, April. [Downloadable!] (restricted)
  2. Boadway, Robin & Marchand, Maurice & Pestieau, Pierre, 1991. "Pay-as-You-Go Social Security in a Changing Environment," Journal of Population Economics, Springer, vol. 4(4), pages 257-80, November.
    Other versions:
  3. Hu, Sheng Cheng, 1979. "Social Security, the Supply of Labor, and Capital Accumulation," American Economic Review, American Economic Association, vol. 69(3), pages 274-83, June. [Downloadable!] (restricted)
  4. Meijdam, Lex & Verbon, Harrie A A, 1997. "Aging and Public Pensions in an Overlapping-Generations Model," Oxford Economic Papers, Oxford University Press, vol. 49(1), pages 29-42, January. [Downloadable!] (restricted)
    Other versions:
  5. Cutler, D.M. & Poterba, J.M. & Sheiner, L.M. & Summers, L.H., 1990. "An Aging Society: Opportunity Or Challenge," Working papers 553, Massachusetts Institute of Technology (MIT), Department of Economics.
    Other versions:
  6. Michel, Philippe, 1990. "Some Clarifications on the Transversality Condition," Econometrica, Econometric Society, vol. 58(3), pages 705-23, May. [Downloadable!] (restricted)
  7. Deardorff, Alan V, 1976. "The Optimum Growth Rate for Population: Comment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(2), pages 510-15, June. [Downloadable!] (restricted)
  8. Bertrand Crettez & Patricia Le Maitre, 2002. "Optimal age of retirement and population growth," Journal of Population Economics, Springer, vol. 15(4), pages 737-755. [Downloadable!] (restricted)
  9. Peters, Wolfgang, 1991. "Public Pensions in Transition: An Optimal Policy Path," Journal of Population Economics, Springer, vol. 4(2), pages 155-75, May.
  10. Atkinson, A B & Sandmo, A, 1980. "Welfare Implications of the Taxation of Savings," Economic Journal, Royal Economic Society, vol. 90(359), pages 529-49, September. [Downloadable!] (restricted)
  11. MICHEL, Philippe & PESTIEAU, Pierre & ,, 1999. "Social security and early retirement in an overlapping-generations growth model," CORE Discussion Papers 1999051, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  12. Laurence J. Kotlikoff, 1996. "Simulating the Privatization of Social Security in General Equilibrium," NBER Working Papers 5776, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October. [Downloadable!] (restricted)
  14. repec:fth:harver:1490 is not listed on IDEAS
  15. 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:
  16. repec:cup:macdyn:v:1:y:1997:i:1:p:7-44 is not listed on IDEAS
  17. 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, Economics Department. [Downloadable!]
  18. HUANG, HE & IMROHOROG[caron]LU, SELAHATTIN & SARGENT, THOMAS J., 1997. "Two Computations To Fund Social Security," Macroeconomic Dynamics, Cambridge University Press, vol. 1(01), pages 7-44, January. [Downloadable!]
  19. Blanchet, Didier & Kessler, Denis, 1991. "Optimal Pension Funding with Demographic Instability and Endogenous Returns on Investment," Journal of Population Economics, Springer, vol. 4(2), pages 137-54, May.
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