The Vulnerability of Social Security When Fertility is Endogenous
This paper analyses the effects of rumours and changes in life expectancy in an economywith endogenous fertility and pay-as-you-go (PAYG) pensions. We show that the endogeneity of fertility makes society vulnerable to both pessimistic beliefs and an increasing life span. On the one hand, rumours that pension benefits decrease appear to be self-fulfilling in the short run. On the other hand, increasing longevity deteriorates the PAYG pension scheme both in the short and in the long run, as the number of children permanently declines.
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Volume (Year): 158 (2002)
Issue (Month): 4 (December)
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- Kotlikoff, Laurence J & Persson, Torsten & Svensson, Lars E O, 1988. "Social Contracts as Assets: A Possible Solution to the Time-Consistency Problem," American Economic Review, American Economic Association, vol. 78(4), pages 662-677, September.
- Galor, Oded & Stark, Oded, 1990. "Migrants' Savings, the Probability of Return Migration and Migrants' Performance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 463-467, May.
- van Groezen, Bas & Leers, Theo & Meijdam, Lex, 2003. "Social security and endogenous fertility: pensions and child allowances as siamese twins," Journal of Public Economics, Elsevier, vol. 87(2), pages 233-251, February.
- Martin Feldstein, 1985. "The Optimal Level of Social Security Benefits," The Quarterly Journal of Economics, Oxford University Press, vol. 100(2), pages 303-320.
- Cigno, Alessandro, 1992. "Children and Pensions," Journal of Population Economics, Springer;European Society for Population Economics, vol. 5(3), pages 175-183, August.
- Bental, Benjamin, 1989. "The Old Age Security Hypothesis and Optimal Population Growth," Journal of Population Economics, Springer;European Society for Population Economics, vol. 1(4), pages 285-301.
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