Fertility Decisions and the Sustainability of Defined Benefit Pay-as-You-Go Pension Systems
AbstractThe sustainability of a defined benefit pay-as-you-go (DBPAYG) pension system is investigated in the context of an overlapping-generations model of endogenous fertility with heterogeneous agents. The model places particular emphasis on the time costs of child rearing. It illustrates the mechanism by which such a pension system can increase the opportunity cost of having children and hence sow the seeds of its own destruction. The model is then extended to allow for fertility-based payments. Such a system is more likely to be sustainable. The model highlights a number of issues that are of relevance to a number of OECD countries that have generous DBPAYG pension systems and falling fertility rates.
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Bibliographic InfoPaper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2009-06.
Length: 36 pages
Date of creation: Apr 2009
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Pay-as-you-go pension; Defined benefit; Overlapping generations; Endogenous fertility; Labor participation Rate; Heterogeneous agents;
Find related papers by JEL classification:
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
- J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
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