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Optimal social security in a dynastic model with investment externalities and endogenous fertility

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This paper studies optimal pay-as-you-go social security with positive bequests and endogenous fertility. With an investment externality, a competitive solution without social security su?ers from under-investment in capital and over-reproduction of population. We show that social security can improve welfare by reducing fertility and increasing capital intensity. We also illustrate numerically that a small degree of this externality is enough to justify the observed high ratios of social security spending to GDP.

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Paper provided by School of Economics, University of Queensland, Australia in its series MRG Discussion Paper Series with number 1006.

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Handle: RePEc:qld:uqmrg6:10

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Cited by:
  1. Momota, Akira & Horii, Ryo, 2011. "Timing of childbirth, capital accumulation, and economic welfare," MPRA Paper 34088, University Library of Munich, Germany.
  2. BAUDIN, Thomas, . "Family policies: What does the standard endogenous fertility model tell us?," CORE Discussion Papers RP -2341, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. repec:hal:journl:halshs-00275751 is not listed on IDEAS
  4. Richard C. Barnett & Joydeep Bhattacharya & Mikko Puhakka, 2012. "Private versus Public Old-Age Security," DEGIT Conference Papers c017_043, DEGIT, Dynamics, Economic Growth, and International Trade.
  5. Michele Tertilt, 2010. "Who Owns Children and Does it Matter?," Discussion Papers 09-003, Stanford Institute for Economic Policy Research.
  6. 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.
  7. Schoonbroodt, Alice & Tertilt, Michèle, 2014. "Property rights and efficiency in OLG models with endogenous fertility," Journal of Economic Theory, Elsevier, vol. 150(C), pages 551-582.
  8. Yasuoka, Masaya & Miyake, Atsushi, 2013. "Public debt, child allowances and pension benefits with endogenous fertility," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 7(11), pages 1-25.
  9. Yew, Siew Ling & Zhang, Jie, 2009. "Optimal social security in a dynastic model with human capital externalities, fertility and endogenous growth," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 605-619, April.

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