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On the optimality of PAYG pension systems in an endogenous fertility setting

  • AB O, G.
  • MAHIEU, G.
  • PATXOT, C.

In order to help in designing an accurate pension reform, we determine the optimal resource allocation in an endogenous fertility model generating a demographic transition. Extending Samuelson’s (1975) work in such a setting, we analyze the problem of the interiority of the optimal solution and discuss the serendipity theorem. We then characterize the decentralization of the first best, showing that a pension policy linking pension benefits to the number of children constitutes an optimal social security program able to restore both the optimal capital stock and the optimal rate of pupulation growth as a unique instrument. We also show that neither a Beveridgean pension scheme nor a Bismarckian one can decentralize the first best.

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Article provided by Cambridge University Press in its journal Journal of Pension Economics and Finance.

Volume (Year): 3 (2004)
Issue (Month): 01 (March)
Pages: 35-62

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Handle: RePEc:cup:jpenef:v:3:y:2004:i:01:p:35-62_00
Contact details of provider: Postal: Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK
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  1. Galor, Oded & Weil, David, 1998. "Population, Technology and Growth: From the Malthusian Regime to the Demographic Transition," CEPR Discussion Papers 1981, C.E.P.R. Discussion Papers.
  2. Galor, Oded & Weil, David, 1995. "The Gender Gap, Fertility and Growth," CEPR Discussion Papers 1157, C.E.P.R. Discussion Papers.
  3. Atkinson, A B & Sandmo, A, 1980. "Welfare Implications of the Taxation of Savings," Economic Journal, Royal Economic Society, vol. 90(359), pages 529-49, September.
  4. Cigno, Alessandro, 1993. "Intergenerational transfers without altruism : Family, market and state," European Journal of Political Economy, Elsevier, vol. 9(4), pages 505-518, November.
  5. Samuelson, Paul A, 1975. "The Optimum Growth Rate for Population," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 531-38, October.
  6. Deardorff, Alan V, 1976. "The Optimum Growth Rate for Population: Comment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(2), pages 510-15, June.
  7. MICHEL, Philippe & PESTIEAU, Pierre, . "Population growth and optimality. When does serendipity hold?," CORE Discussion Papers RP -1072, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. repec:cup:cbooks:9780521001151 is not listed on IDEAS
  9. Gary S. Becker & Kevin M. Murphy & Robert F. Tamura, 1990. "Human Capital, Fertility, and Economic Growth," NBER Working Papers 3414, National Bureau of Economic Research, Inc.
  10. Kolmar, Martin, 2001. " Optimal Intergenerational Redistribution in a Two-Country Model with Endogenous Fertility," Public Choice, Springer, vol. 106(1-2), pages 23-51, January.
  11. Martin Kolmar, 1997. "Intergenerational redistribution in a small open economy with endogenous fertility," Journal of Population Economics, Springer, vol. 10(3), pages 335-356.
  12. Schweizer, Urs, 1996. "Endogenous fertility and the Henry George Theorem," Journal of Public Economics, Elsevier, vol. 61(2), pages 209-228, August.
  13. Bental, Benjamin, 1989. "The Old Age Security Hypothesis and Optimal Population Growth," Journal of Population Economics, Springer, vol. 1(4), pages 285-301.
  14. Samuelson, Paul A, 1976. "The Optimum Growth Rate for Population: Agreement and Evaluations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(2), pages 516-25, June.
  15. Eckstein, Zvi & Wolpin, Kenneth I., 1985. "Endogenous fertility and optimal population size," Journal of Public Economics, Elsevier, vol. 27(1), pages 93-106, June.
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