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The Vulnerability of Social Security When Fertility is Endogenous

Author

Listed:
  • Bas van Groezen
  • Theo Leers
  • Lex Meijdam

Abstract

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.

Suggested Citation

  • Bas van Groezen & Theo Leers & Lex Meijdam, 2002. "The Vulnerability of Social Security When Fertility is Endogenous," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 158(4), pages 715-730, December.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200212)158:4_715:tvossw_2.0.tx_2-7
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    References listed on IDEAS

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    1. 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.
    2. Martin Feldstein, 1985. "The Optimal Level of Social Security Benefits," The Quarterly Journal of Economics, Oxford University Press, vol. 100(2), pages 303-320.
    3. 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.
    4. Cigno, Alessandro, 1992. "Children and Pensions," Journal of Population Economics, Springer;European Society for Population Economics, vol. 5(3), pages 175-183, August.
    5. 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.
    6. 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.
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    Cited by:

    1. Rafael Barrera Gutiérrez, 2011. "El vacío institucional en el modelo de elección racional aplicado a la fecundidad," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 13(25), pages 223-248, July-Dece.

    More about this item

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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