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PAYG pensions and fertility drop: some (pleasant) arithmetic

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  • Luciano Fanti
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    Abstract

    This paper explores whether the common belief that the currently observed fertility drop is a threat (or, conversely, the invoked fertility recovery is beneficial) for PAYG pensions is really always validated by the basic accounting of the PAYG pension budget. It is shown, through a simple arithmetic, that, rather surprisingly, in the long run a fertility drop may be beneficial, while, conversely, a fertility recovery may be harmful for pensions, under rather realistic conditions as regards both fertility changes and time costs of childrearing. Furthermore, this result also holds a fortiori in the short run.

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    Bibliographic Info

    Paper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2012/146.

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    Date of creation: 01 Sep 2012
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    Handle: RePEc:pie:dsedps:2012/146

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    Keywords: PAYG pension; OLG model.;

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    1. Deaton, Angus S & Muellbauer, John, 1986. "On Measuring Child Costs: With Applications to Poor Countries," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 720-44, August.
    2. Hans-Werner Sinn, 2011. "Introduction," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 12(3), pages 09-17, December.
    3. Jens Bonke & Martin Browning, 2011. "Spending on Children: Direct Survey Evidence," Economic Journal, Royal Economic Society, vol. 121(554), pages F123-F143, 08.
    4. Hans-Werner Sinn, 2013. "Introduction: relaunching Europe: problems, reform strategies and future options," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 14(3), pages 08-13, October.
    5. Fanti, Luciano & Gori, Luca, 2010. "Increasing PAYG pension benefits and reducing contribution rates," Economics Letters, Elsevier, vol. 107(2), pages 81-84, May.
    6. Alessandro Cigno & Martin Werding, 2007. "Children and Pensions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033690.
    7. Sinn, Hans-Werner & Uebelmesser, Silke, 2003. "Pensions and the path to gerontocracy in Germany," European Journal of Political Economy, Elsevier, vol. 19(1), pages 153-158, March.
    8. Tito Boeri & Axel Börsch-Supan & Guido Tabellini, 2001. "Would you like to shrink the welfare state? A survey of European citizens," Economic Policy, CEPR & CES & MSH, vol. 16(32), pages 7-50, 04.
    9. Luca Gori & Luciano Fanti, 2008. "Longevity and PAYG pension systems sustainability," Economics Bulletin, AccessEcon, vol. 10(2), pages 1-8.
    10. Bradbury, Bruce, 1994. "Measuring the Cost of Children," Australian Economic Papers, Wiley Blackwell, vol. 33(62), pages 120-38, June.
    11. repec:ebl:ecbull:v:10:y:2008:i:2:p:1-8 is not listed on IDEAS
    12. Tito Boeri & Axel Boersch-Supan & Guido Tabellini, 2002. "Pension Reforms and the Opinions of European Citizens," American Economic Review, American Economic Association, vol. 92(2), pages 396-401, May.
    13. Robert Fenge & Volker Meier, 2003. "Pensions and Fertility Incentives," CESifo Working Paper Series 879, CESifo Group Munich.
    14. Robert Fenge & Jakob Weizsäcker, 2010. "Mixing Bismarck and child pension systems: an optimum taxation approach," Journal of Population Economics, Springer, vol. 23(2), pages 805-823, March.
    15. Luciano Fanti & Luca Gori, 2009. "Longevity, fertility and PAYG pension systems sustainability," Discussion Papers 2009/77, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
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