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Optimal intergenerational transfers in an endogenous growth model with fertility change

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  • MARCHAND, Maurice

    (IAG and CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium)

  • MICHEL, Philippe

    (CEM, Université de Paris 1, Paris, France)

  • PESTIEAU, Pierre

    (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve and Université de Liège, B-4000Liège, Belgium)

Abstract

This paper analyzes the direction of optimal intergenerational transfers in a setting of endogenous growth à la Arrow-Romer. It shows that the case for ascending transfers such as implied by pay-as-you-go social security is rather weak. What is rather needed is a subsidy on interest income. When demographic shocks are introduced, during the transition period following an unexpected fertility decline, the case for a transfer from the younger to the older generation appears to be stronger. We compare the market equilibrium and the optimal solution in the two cases of a permanent shock and of a transitory shock.

Suggested Citation

  • MARCHAND, Maurice & MICHEL, Philippe & PESTIEAU, Pierre, 1993. "Optimal intergenerational transfers in an endogenous growth model with fertility change," CORE Discussion Papers 1993011, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:1993011
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    File URL: https://uclouvain.be/en/research-institutes/immaq/core/dp-1993.html
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    Cited by:

    1. Giammarioli, Nicola & Annicchiarico, Barbara, 2004. "Fiscal rules and sustainability of public finances in an endogenous growth model," Working Paper Series 381, European Central Bank.
    2. DOCQUIER, Frédéric & PADDISON, Oliver, 2000. "Growth and equality effects of pension plans," CORE Discussion Papers 2000036, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Luciano Fanti, 2012. "Consequences of a boost of mandatory retirement age on long run income and PAYG pensions," Discussion Papers 2012/149, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    4. Luciano Fanti, 2015. "Growth, PAYG pension systems crisis and mandatory age of retirement," Economics Bulletin, AccessEcon, vol. 35(2), pages 1160-1167.
    5. Claire Loupias & Bertrand Crettez & Isabelle Job, 1997. "Dette publique et croissance endogène," Revue Économique, Programme National Persée, vol. 48(6), pages 1439-1455.
    6. Gilles Le Garrec, 2012. "Social security and growth in an aging economy : the case of acturial fairness," Sciences Po publications 2012-18, Sciences Po.
    7. Barthélémy, Vincent, 2000. "Système éducatif et bien-être social : faut-il subventionner l’éducation?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 76(4), pages 521-541, décembre.
    8. Alders, Peter & Broer, D. Peter, 2005. "Ageing, fertility, and growth," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1075-1095, June.

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