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PAYG Pensions and Human Capital Accumulation: Some Unpleasant Arithmetic

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  • Giam Pietro Cipriani

    ()

  • Miltiadis Makris

Abstract

A large literature has studied the effects of PAYG systems on fertility, human capital and growth. We argue that the social security system may also interact with longevity when the latter is endogenously determined. We show that in such an environment, in a dynamically efficient economy PAYG pensions must be sufficiently low in order to ensure positive economic growth. Moreover, a transition to a funded social security system will promote growth, and can thereby take place by fully compensating the losers.

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Bibliographic Info

Paper provided by CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY in its series CHILD Working Papers with number wp19_09.

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Length: 19 pages
Date of creation: Jul 2009
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Handle: RePEc:wpc:wplist:wp19_09

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Keywords: Pensions; Human Capital; Growth; Endogenous Longevity;

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  1. David M. Cutler & Angus S. Deaton & Adriana Lleras-Muney, 2006. "The Determinants of Mortality," NBER Working Papers 11963, National Bureau of Economic Research, Inc.
  2. Panu Poutvaara, 2005. "Social Security Incentives, Human Capital Investment and Mobility of Labor," CESifo Working Paper Series 1544, CESifo Group Munich.
  3. Nishimura, Kazuo & Zhang, Junsen, 1992. "Pay-as-you-go public pensions with endogenous fertility," Journal of Public Economics, Elsevier, vol. 48(2), pages 239-258, July.
  4. Robert Tamura, 2004. "Human capital and economic development," Working Paper 2004-34, Federal Reserve Bank of Atlanta.
  5. Christopher H. Wheeler, 2007. "Human capital externalities and adult mortality in the U.S," Working Papers 2007-045, Federal Reserve Bank of St. Louis.
  6. Berthold U. Wigger, 1999. "Pay-as-you-go financed public pensions in a model of endogenous growth and fertility," Journal of Population Economics, Springer, vol. 12(4), pages 625-640.
  7. Echevarría Olave, Cruz Angel & Iza Padilla, María Amaya, 2006. "Life Expectancy, Human Capital, Social Security and Growth," DFAEII Working Papers 2005-17, University of the Basque Country - Department of Foundations of Economic Analysis II.
  8. Abel, Andrew B, et al, 1989. "Assessing Dynamic Efficiency: Theory and Evidence," Review of Economic Studies, Wiley Blackwell, vol. 56(1), pages 1-19, January.
  9. PESTIEAU, Pierre & PONTHIÈRE, Grégory & SATO, Motohiro, 2006. "Longevity and Pay-as-you-Go pensions," CORE Discussion Papers 2006054, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Munich Reprints in Economics 19606, University of Munich, Department of Economics.
  11. Cigno, Alessandro, 1992. "Children and Pensions," Journal of Population Economics, Springer, vol. 5(3), pages 175-83, August.
  12. Helmut Cremer & Firouz Gahvari & Pierre Pestieau, 2006. "Pensions with endogenous and stochastic fertility," Working Papers 22594, Institut National de la Recherche Agronomique, France.
  13. DOCQUIER, Frédéric & PADDISON, Oliver & PESTIEAU, Pierre, . "Optimal accumulation in an endogenous growth setting with human capital," CORE Discussion Papers RP -2021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Cervellati, Matteo & Sunde, Uwe, 2005. "Human capital formation, life expectancy, and the process of development," Munich Reprints in Economics 20083, University of Munich, Department of Economics.
  15. Matteo Cervellati & Uwe Sunde, 2005. "Human Capital Formation, Life Expectancy, and the Process of Development," American Economic Review, American Economic Association, vol. 95(5), pages 1653-1672, December.
  16. Andersen, Torben M., 2008. "Increasing longevity and social security reforms--A legislative procedure approach," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 633-646, April.
  17. Rosati, Furio Camillo, 1996. "Social security in a non-altruistic model with uncertainty and endogenous fertility," Journal of Public Economics, Elsevier, vol. 60(2), pages 283-294, May.
  18. BELAN, Pascal & MICHEL, Philippe & PESTIEAU, Pierre, . "Pareto-improving social security reform," CORE Discussion Papers RP -1372, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  19. Davies, James B. & Kuhn, Peter, 1992. "Social security, longevity, and moral hazard," Journal of Public Economics, Elsevier, vol. 49(1), pages 91-106, October.
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  21. Alders, Peter & Broer, D. Peter, 2005. "Ageing, fertility, and growth," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1075-1095, June.
  22. Giam Pietro Cipriani & Miltiadis Makris, 2004. "Indeterminacy, intergenerational redistribution, endogenous longevity and human capital accumulation," Discussion Papers 0401, Exeter University, Department of Economics.
  23. Tomas J. Philipson & Gary S. Becker, 1998. "Old-Age Longevity and Mortality-Contingent Claims," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 551-573, June.
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Cited by:
  1. Cipriani, Giam Pietro, 2013. "Population Ageing and PAYG Pensions in the OLG Model," IZA Discussion Papers 7144, Institute for the Study of Labor (IZA).

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