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Social Security, the Family, and Economic Growth

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  • Ehrlich, Isaac
  • Lui, Francis T

Abstract

The authors show that a defined-benefits pay-as-you-go (PAYG) social security system distorts key family-based choices that affect economic growth. They identify human capital as the engine of growth, and the motivating forces linking the family's overlapping generations as mutually productive intergenerational transfers and/or altruism. The PAYG system is shown to affect adversely at least one of three determinants of the economy's growth path: fertility, savings, and investment in human capital. The specific effects may vary over different stages of economic development. The growth rate is expected to fall in advanced economies. The authors' analysis indicates that the effect may be sizeable. Copyright 1998 by Oxford University Press.

Suggested Citation

  • Ehrlich, Isaac & Lui, Francis T, 1998. "Social Security, the Family, and Economic Growth," Economic Inquiry, Western Economic Association International, vol. 36(3), pages 390-409, July.
    • Handle: RePEc:oup:ecinqu:v:36:y:1998:i:3:p:390-409
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    Citations

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    Cited by:

    1. Michele Boldrin & Maria Cristina De Nardi & Larry E. Jones, 2005. "Fertility and Social Security," Levine's Bibliography 666156000000000506, UCLA Department of Economics.
    2. Martin Werding, 2006. "Kinderrente und Vorsorgepflicht - der ifo-Vorschlag zur Lösung der demographischen Krise des Rentensystems," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 59(07), pages 44-53, April.
    3. Miller, Stephen M. & Neanidis, Kyriakos C., 2015. "Demographic transition and economic welfare: The role of in-cash and in-kind transfers," The Quarterly Review of Economics and Finance, Elsevier, vol. 58(C), pages 84-92.
    4. Giam Cipriani, 2014. "Population aging and PAYG pensions in the OLG model," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(1), pages 251-256, January.
    5. Isaac Ehrlich & Jinyoung Kim, 2005. "Social Security, Demographic Trends, and Economic Growth: Theory and Evidence from the International Experience," NBER Working Papers 11121, National Bureau of Economic Research, Inc.
    6. Cruz A. Echevarría & Amaia Iza, 2011. "Social security, education retirement and growth," Hacienda Pública Española, IEF, vol. 198(3), pages 9-36, September.
    7. Del Rey, Elena & Lopez-Garcia, Miguel-Angel, 2016. "Endogenous growth and welfare effects of education subsidies and intergenerational transfers," Economic Modelling, Elsevier, vol. 52(PB), pages 531-539.
    8. Juan A. Rojas, 2004. "On the Interaction between Education and Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(4), pages 932-957, October.
    9. Awaworyi Churchill, S. & Yew, S.L., 2017. "Are government transfers harmful to economic growth? A meta-analysis," Economic Modelling, Elsevier, vol. 64(C), pages 270-287.
    10. Yoshitaka Koda & Manachaya Uruyos, 2015. "Altruism and four shades of family relationships," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 345-365, December.
    11. Michele BOLDRIN & Mariacristina DE NARDI & Larry E. JONES, 2015. "Fertility and Social Security," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 81(3), pages 261-299, September.
    12. Mulligan Casey B & Gil Ricard & Sala-i-Martin Xavier X, 2010. "Social Security and Democracy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-46, March.
    13. Vincenzo Galasso & Roberta Gatti & Paola Profeta, 2009. "Investing for the old age: pensions, children and savings," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(4), pages 538-559, August.
    14. Siew Ling Yew & Jie Zhang, 2018. "Health spending, savings and fertility in a lifecycle-dynastic model with longevity externalities," Canadian Journal of Economics, Canadian Economics Association, vol. 51(1), pages 186-215, February.
    15. Alejandra Cox Edwards & Estelle James, 2010. "Impact of Social Security Reform on Labor Force Participation Rates of Pensioners and Nonpensioners: Evidence from Chile," Journal of Human Capital, University of Chicago Press, vol. 4(2), pages 130-172.
    16. Lancia, Francesco & Russo, Alessia, 2010. "A Dynamic Politico-Economic Model of Intergenerational Contracts," MPRA Paper 24795, University Library of Munich, Germany.
    17. Mikko Puhakka & Matti Viren, 2006. "The Effects of the Size of the Public Sector on Fertility," Discussion Papers 8, Aboa Centre for Economics.
    18. Zhang, Jie & Zhang, Junsen, 2003. "Long-run effects of unfunded social security with earnings-dependent benefits," Journal of Economic Dynamics and Control, Elsevier, vol. 28(3), pages 617-641, December.

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