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

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

Abstract

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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Suggested Citation

  • Ab O, G. & Mahieu, G. & Patxot, C., 2004. "On the optimality of PAYG pension systems in an endogenous fertility setting," Journal of Pension Economics and Finance, Cambridge University Press, vol. 3(01), pages 35-62, March.
  • Handle: RePEc:cup:jpenef:v:3:y:2004:i:01:p:35-62_00
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    1. Michel, Philippe & Pestieau, P, 1993. "Population Growth and Optimality: When Does Serendipity Hold?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 6(4), pages 353-362, November.
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    3. Gary S. Becker & Kevin M. Murphy & Robert Tamura, 1994. "Human Capital, Fertility, and Economic Growth," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 323-350 National Bureau of Economic Research, Inc.
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    More about this item

    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
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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