IDEAS home Printed from https://ideas.repec.org/a/ipf/psejou/v49y2025i2p239-250.html
   My bibliography  Save this article

An economic analysis of leisure-proportional benefits in a small open economy

Author

Listed:
  • Wataru Kobayashi

    (Faculty of Economics, Asia University, Tokyo, Japan)

  • Junichiro Takahata

    (Faculty of Economics, Dokkyo University, Saitama, Japan)

Abstract

This paper analyses the impact of public pensions on resource allocation in a small open economy. In particular, we focus on the economic implications of leisure-proportional benefits. It is well known that a pay-as-you-go scheme can improve social welfare when the population growth rate exceeds the interest rate, which we call the “Aaron effect†. We analyse the changes in labour supply, savings, and social welfare from an increase in the public pension taking into account the Aaron effect. We obtain the following results. First, we show that the effect of public pensions on labour supply includes the Aaron effect, but regardless of its sign, labour supply decreases as public pensions increase. Second, the effect of public pensions on savings does not include the Aaron effect, and savings decrease as public pensions increase. Third, the effect of the introduction of public pensions on social welfare consists only of the Aaron effect.

Suggested Citation

  • Wataru Kobayashi & Junichiro Takahata, 2025. "An economic analysis of leisure-proportional benefits in a small open economy," Public Sector Economics, Institute of Public Finance, vol. 49(2), pages 239-250.
    • Handle: RePEc:ipf:psejou:v:49:y:2025:i:2:p:239-250
    DOI: 10.3326/pse.49.2.3
    as

    Download full text from publisher

    File URL: http://pse-journal.hr/upload/files/pse/2025/2/An_economic_analysis_of_leisure_proportional_benefits_in_a_small_open.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.3326/pse.49.2.3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    ocial security; endogenous retirement; labour supply; savings; social welfare;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ipf:psejou:v:49:y:2025:i:2:p:239-250. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martina Fabris (email available below). General contact details of provider: https://edirc.repec.org/data/ijfffhr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.