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Fertility and PAYG pensions in the overlapping generations model

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  • Luciano Fanti
  • Luca Gori

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Abstract

This article analyses how long-run pay-as-you-go public pensions react to a change in fertility in the basic overlapping generations model of neoclassical growth. While it would seem well established both in the academic and political debates that the decline in fertility represents a “demographic time bomb” for the sustainability of public pensions, it is shown that a falling birth rate need not necessarily cause long-run pension benefit to fall.
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Suggested Citation

  • Luciano Fanti & Luca Gori, 2012. "Fertility and PAYG pensions in the overlapping generations model," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(3), pages 955-961, July.
  • Handle: RePEc:spr:jopoec:v:25:y:2012:i:3:p:955-961
    DOI: 10.1007/s00148-011-0359-7
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    References listed on IDEAS

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    1. Tito Boeri & Axel Börsch-Supan & Guido Tabellini, 2001. "Would you like to shrink the welfare state? A survey of European citizens," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 7-50, April.
    2. Robert Fenge & Jakob Weizsäcker, 2010. "Mixing Bismarck and child pension systems: an optimum taxation approach," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(2), pages 805-823, March.
    3. Deaton, Angus S & Muellbauer, John, 1986. "On Measuring Child Costs: With Applications to Poor Countries," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 720-744, August.
    4. Fanti, Luciano & Gori, Luca, 2010. "Increasing PAYG pension benefits and reducing contribution rates," Economics Letters, Elsevier, vol. 107(2), pages 81-84, May.
    5. Michele Boldrin & Larry E. Jones, 2002. "Mortality, Fertility, and Saving in a Malthusian Economy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(4), pages 775-814, October.
    6. 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.
    7. Berthold U. Wigger, 1999. "Pay-as-you-go financed public pensions in a model of endogenous growth and fertility," Journal of Population Economics, Springer;European Society for Population Economics, vol. 12(4), pages 625-640.
    8. Burbidge, John B., 1983. "Social security and savings plans in overlapping-generations models," Journal of Public Economics, Elsevier, vol. 21(1), pages 79-92, June.
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    Citations

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    Cited by:

    1. Ken Tabata, 2015. "Population Aging and Growth: the Effect of PAYG Pension Reform," Discussion Paper Series 125, School of Economics, Kwansei Gakuin University, revised Jan 2015.
    2. Luciano Fanti & Luca Gori & Fabio Tramontana, 2014. "Endogenous lifetime, accidental bequests and economic growth," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 37(1), pages 81-98, April.
    3. Luciano Fanti & Luca Gori, 2014. "Endogenous fertility, endogenous lifetime and economic growth: the role of child policies," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(2), pages 529-564, April.
    4. Gerlagh, Reyer & Jaimes, Richard & Motavasseli, Ali, 2017. "Global demographic change and climate policies," Discussion Paper 2017-035, Tilburg University, Center for Economic Research.
    5. 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.
    6. Luciano Fanti & Luca Gori, 2013. "Fertility-related pensions and cyclical instability," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1209-1232, July.
    7. Paolo Melindi-Ghidi & Willem Sas, 2015. "Invest as You Go: How Public Health Investment Keeps Pension Systems Healthy," Working Papers halshs-01171701, HAL.
    8. repec:dem:demres:v:37:y:2017:i:27 is not listed on IDEAS
    9. Gurgen Aslanyan, 2012. "Migration Challenge for PAYG," FIW Working Paper series 101, FIW.
    10. Cipriani, Giam Pietro, 2016. "Aging, Retirement and Pay-As-You-Go Pensions," IZA Discussion Papers 9969, Institute for the Study of Labor (IZA).
    11. Kojun Hamada & Akihiko Kaneko & Mitsuyoshi Yanagihara, 2017. "The transfer paradox in a pay-as-you-go pension system," International Economics and Economic Policy, Springer, vol. 14(2), pages 221-238, April.
    12. Chen, Hung-Ju, 2016. "Fertility, Retirement Age, and PAYG Pensions," MPRA Paper 69819, University Library of Munich, Germany.
    13. Chen, Hung-Ju, 2015. "Fertility and PAYG Pensions in an Overlapping Generations Model with Endogenous Retirement," MPRA Paper 68020, University Library of Munich, Germany.
    14. Ken Tabata, 2015. "Population Aging and Growth: The Effect of Pay-as-You-Go Pension Reform," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 71(3), pages 385-406, September.
    15. Luca Spataro & Luciano Fanti, 2013. "From Malthusian to Modern fertility: When intergenerational transfers matter," Discussion Papers 2013/163, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    16. Luciano Fanti, 2012. "Fertility and money in an OLG model," Discussion Papers 2012/145, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    17. Chen, Hung-Ju, 2015. "Fertility, Official Pension Age, and PAYG Pensions," MPRA Paper 66429, University Library of Munich, Germany.
    18. Koichi Miyazaki, 2013. "Pay-as-you-go social security and endogenous fertility in a neoclassical growth model," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1233-1250, July.
    19. Gurgen Aslanyan, 2014. "The migration challenge for PAYG," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(4), pages 1023-1038, October.
    20. Takaaki Morimoto & Yuta Nakabo & Ken Tabata, 2016. "Population Aging, Fiscal Sustainability and PAYG Pension Reform," Discussion Paper Series 140, School of Economics, Kwansei Gakuin University, revised Feb 2016.
    21. Luca Spataro, Luciano Fanti and Pier Mario Pacini, 2017. "Savings, fertility and public policy in an OLG small open economy," Discussion Papers 2017/230, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    22. repec:gam:jsusta:v:9:y:2017:i:12:p:2252-:d:121847 is not listed on IDEAS
    23. Peter J. Stauvermann & Ronald R. Kumar, 2016. "Sustainability of A Pay-as-you-Go Pension System in A Small Open Economy with Ageing, Human Capital and Endogenous Fertility," Metroeconomica, Wiley Blackwell, vol. 67(1), pages 2-20, February.
    24. Takaaki Morimoto & Yuta Nakabo & Ken Tabata, 2018. "Population Aging, Labor Market Frictions, and PAYG Pension," Discussion Paper Series 172, School of Economics, Kwansei Gakuin University, revised Jan 2018.
    25. Luciano Fanti, 2014. "Raising the Mandatory Retirement Age and its Effect on Long-run Income and Pay-as-you-go (PAYG) Pensions," Metroeconomica, Wiley Blackwell, vol. 65(4), pages 619-645, November.

    More about this item

    Keywords

    Fertility; PAYG pensions; OLG model; J26; O41;

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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