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Pensions with heterogenous individuals and endogenous fertility

  • Helmuth Cremer

    ()

  • Firouz Gahvari

    ()

  • Pierre Pestieau

    ()

This paper studies the design of pension schemes in a society where fertility is endogenous and parents differ in their ability to raise children. In a world with perfect information, a pay-as-you-go social security system is characterized by equal pensions for all but different contributions which may or may not increase with the number of children. Additionally, fertility must be subsidized at the margin to correct for the externality that accompanies fertility. In a world of asymmetric information, incentive-related distortions supplement the Pigouvian subsidy. These may either require an additional subsidy or an offsetting tax on fertility depending on whether the redistribution is towards people with more or less children. In the former case, pensions are decreasing in the number of children: in the latter case, they are increasing.

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File URL: http://hdl.handle.net/10.1007/s00148-006-0114-7
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Article provided by Springer in its journal Journal of Population Economics.

Volume (Year): 21 (2008)
Issue (Month): 4 (October)
Pages: 961-981

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Handle: RePEc:spr:jopoec:v:21:y:2008:i:4:p:961-981
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  1. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Munich Reprints in Economics 19606, University of Munich, Department of Economics.
  2. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2004. "Hidden information problems in the design of family allowances," Journal of Population Economics, Springer, vol. 17(4), pages 645-655, December.
  3. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  4. Bental, Benjamin, 1989. "The Old Age Security Hypothesis and Optimal Population Growth," Journal of Population Economics, Springer, vol. 1(4), pages 285-301.
  5. Ab O, G. & Mahieu, G. & Patxot, C., 2004. "On the optimality of PAYG pension systems in an endogenous fertility setting," Journal of Pension Economics and Finance, Cambridge University Press, vol. 3(01), pages 35-62, March.
  6. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2000. "Tranfers to families with children as a principal-agent problem," CHILD Working Papers wp02_00, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  7. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Munich Reprints in Economics 938, University of Munich, Department of Economics.
  8. CREMER, Helmuth & PESTIEAU, Pierre & GAHVARI, Firouz, 2004. "Pensions with endogenous and stochastic fertility," CORE Discussion Papers 2004067, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. 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.
  10. Fenge, Robert & Meier, Volker, 2005. "Pensions and Fertility Incentives," Munich Reprints in Economics 20343, University of Munich, Department of Economics.
  11. Robert Fenge & Volker Meier, 2003. "Pensions and Fertility Incentives," CESifo Working Paper Series 879, CESifo Group Munich.
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