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Optimal Intergenerational Redistribution in a Two-Country Model with Endogenous Fertility

  • Kolmar, Martin

We analyze a model with two countries that are linked by an integrated capital market. Fertility, and thus population growth, is endogenously determined by households. Our analysis proceeds in three steps: First, we characterize an optimal intertemporal and interregional allocation in a model with endogenous fertility and two countries. Second, we look for an institution supporting the optimal allocation. It turns out that in general, a decentralized equilibrium is inefficient. National public-pension systems with benefits that are related to the number of children implements the optimal allocation. This provides a justification for government interventions beyond its role as a "night-watchman." Third, we analyze whether national governments have the right incentives to implement the optimal system. It turns out that every national government has an incentive to deviate from the optimal structure and to shift part of the burden to the other country. Policy implications for the institutional arrangements within the European Union are discussed. Copyright 2001 by Kluwer Academic Publishers

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Article provided by Springer in its journal Public Choice.

Volume (Year): 106 (2001)
Issue (Month): 1-2 (January)
Pages: 23-51

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Handle: RePEc:kap:pubcho:v:106:y:2001:i:1-2:p:23-51
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  1. Stefan Homburg & Wolfram Richter, 1993. "Harmonizing public debt and public pension schemes in the European community," Journal of Economics, Springer, vol. 58(1), pages 51-63, December.
  2. Torsten Persson, 1983. "Deficits and Intergenerational Welfare in Open Economies," NBER Working Papers 1083, National Bureau of Economic Research, Inc.
  3. Martin Kolmar, 1997. "Intergenerational redistribution in a small open economy with endogenous fertility," Journal of Population Economics, Springer, vol. 10(3), pages 335-356.
  4. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
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  17. Bental, Benjamin, 1989. "The Old Age Security Hypothesis and Optimal Population Growth," Journal of Population Economics, Springer, vol. 1(4), pages 285-301.
  18. Lapan, Harvey E. & Enders, Walter, 1990. "Endogenous Fertility, Ricardian Equivalence and Debt Management Policy," Staff General Research Papers 10814, Iowa State University, Department of Economics.
  19. Assaf Razin & Efraim Sadka, 1995. "Population Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262181606, June.
  20. Schweizer, Urs, 1996. "Endogenous fertility and the Henry George Theorem," Journal of Public Economics, Elsevier, vol. 61(2), pages 209-228, August.
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