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Pension Design when Fertility Fluctuates: The Role of Capital Mobility and Education Financing

  • Jovan Zamac

This study compares alternative designs of an unfunded pension system. Convex combinations between a fixed contribution rate and a fixed benefit rate are considered. The objective is to maximize the expected ex-ante welfare under stochastic fertility. The model is a three-period CGE framework where the design of the education system and effects on factor prices are accounted for. The effects on factor prices depend on the degree of capital mobility. For low degrees of capital mobility it is optimal to have a fixed benefit rate in the pension system. But for the small open economy, a fixed contribution rate is optimal if the education system has a fixed benefit rate. This design of education and pension systems assures that individuals in the small open economy are unaffected by fertility fluctuations.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2005/wp-cesifo-2005-10/cesifo1_wp1569.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1569.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1569
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  1. repec:fth:harver:1490 is not listed on IDEAS
  2. Zamac , Jovan, 2005. "Winners and Losers from a Demographic Shock under Different Intergenerational Transfer Schemes," Working Paper Series 2005:13, Uppsala University, Department of Economics.
  3. David Card & Alan Krueger, 1990. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Working Papers 645, Princeton University, Department of Economics, Industrial Relations Section..
  4. Stephanie Schmitt-Grohe & Martin Uribe, 2001. "Closing Small Open Economy Models," Departmental Working Papers 200115, Rutgers University, Department of Economics.
  5. Andreas Wagener, 2003. "Pensions as a portfolio problem: fixed contribution rates vs. fixed replacement rates reconsidered," Journal of Population Economics, Springer, vol. 16(1), pages 111-134, 02.
  6. ûystein ThÛgersen, 1998. "A note on intergenerational risk sharing and the design of pay-as-you-go pension programs," Journal of Population Economics, Springer, vol. 11(3), pages 373-378.
  7. Kotlikoff, Laurence J & Summers, Lawrence H, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 706-32, August.
  8. Blanchet, Didier & Kessler, Denis, 1991. "Optimal Pension Funding with Demographic Instability and Endogenous Returns on Investment," Journal of Population Economics, Springer, vol. 4(2), pages 137-54, May.
  9. Laurence Ball & N. Gregory Mankiw, 2007. "Intergenerational Risk Sharing in the Spirit of Arrow, Debreu, and Rawls, with Applications to Social Security Design," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 523-547, 08.
  10. Cutler, D.M. & Poterba, J.M. & Sheiner, L.M. & Summers, L.H., 1990. "An Aging Society: Opportunity Or Challenge," Working papers 553, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Smith, Alasdair, 1982. "Intergenerational transfers as social insurance," Journal of Public Economics, Elsevier, vol. 19(1), pages 97-106, October.
  12. Michele Boldrin & Ana Montes, 2005. "The Intergenerational State Education and Pensions," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 651-664.
  13. Lindbeck, Assar, 2001. "Pensions and Contemporary Socioeconomic Change," Working Paper Series 548, Research Institute of Industrial Economics.
  14. Becker, Gary S & Murphy, Kevin M, 1988. "The Family and the State," Journal of Law and Economics, University of Chicago Press, vol. 31(1), pages 1-18, April.
  15. BOADWAY, Robin & MARCHAND, Maurice & PESTIEAU, Pierre, . "Pay-as-you go social security in a changing environment," CORE Discussion Papers RP -961, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  16. Maurice Obstfeld and Kenneth Rogoff., 2000. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," Center for International and Development Economics Research (CIDER) Working Papers C00-112, University of California at Berkeley.
  17. Antonio Rangel, 2003. "Forward and Backward Intergenerational Goods: Why Is Social Security Good for the Environment?," American Economic Review, American Economic Association, vol. 93(3), pages 813-834, June.
  18. Blomquist, N S & Wijkander, H, 1994. "Fertility Waves, Aggregate Savings and the Rate of Interest," Journal of Population Economics, Springer, vol. 7(1), pages 27-48.
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