This paper studies the implications of state pension plan reform on fertility and on growth. It extends the Grossman and Yanagawa (1993) endogenous growth framework by incorporating altruism, making fertility endogenous. We investigate the effect on long-run growth of a switch from a Pay-As-You-Go (PAYG) pension system to a fully-funded system. We show that a PAYG pension system is associated with a lower fertility rate than a fully-funded system. This lower fertility in turn increases the rate of growth. Hence, switching from a PAYG system to a fully-funded system may be harmful, especially for developing countries in which limited resources are heavily stressed by high fertility rates. In addition, we propose a hypothetical pension system, the Saving Subsidy Program (SSP), which would yield a higher growth rate than the PAYG system. The SSP consists of a minimum benefit level for each retiree and of a subsidy to private savings.
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Paper provided by Department of Economics, University of York in its series Discussion Papers with number
00/31.
Length: Date of creation: Date of revision: Handle: RePEc:yor:yorken:00/31
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Gale, W.G. & scholz, J.K., 1992.
"IRAS and Household Saving,"
Papers
9244, Tilburg - Center for Economic Research.
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Michele Boldrin & Maria Cristina De Nardi & Larry E. Jones, 2005.
"Fertility and Social Security,"
Levine's Bibliography
666156000000000506, UCLA Department of Economics.
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Other versions:
Michele Boldrin & Mariacristina De Nardi & Larry E. Jones, 2005.
"Fertility and Social Security,"
NBER Working Papers
11146, National Bureau of Economic Research, Inc.
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Michele Boldrin & Mariacristina De Nardi & Larry E. Jones, 2005.
"Fertility and Social Security,"
Staff Report
359, Federal Reserve Bank of Minneapolis.
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