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Fertility-related pensions and cyclical instability

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  • Fanti, Luciano
  • Gori, Luca

Abstract

We show that the introduction of unfunded public pensions in a Cobb-Douglas economy with overlapping generations and endogenous fertility may cause complex economic cycles when individuals are short-sighted. In particular, the risk of cyclical instability increases with both the individual degree of thriftiness and the relative weight of individual fertility in the pension system. Our results provide a possible explanation of the occurrence of persistent cycles in an overlapping generations context and represent a policy warning about the dramatic destabilising effects of a fertility-related pension reform.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20221.

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Date of creation: 23 Jan 2010
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Handle: RePEc:pra:mprapa:20221

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Keywords: Endogenous fertility; Fertility-related pensions; Myopic foresight; OLG model;

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Cited by:
  1. Luciano Fanti & Luca Gori, 2014. "Endogenous fertility, endogenous lifetime and economic growth: the role of child policies," Journal of Population Economics, Springer, vol. 27(2), pages 529-564, April.
  2. Luciano Fanti & Luca Gori, 2014. "An OLG model of growth with longevity: when grandparents take care of grandchildren," Portuguese Economic Journal, Springer, vol. 13(1), pages 39-51, April.
  3. Gilles Le Garrec, 2014. "Increased longevity and social security reform : questioning the optimality of individual accounts when education matters," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2014-13, Observatoire Francais des Conjonctures Economiques (OFCE).

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