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How should the allocation of resources adjust to the baby bust?

  • DE LA CROIX, David
  • MAHIEU, Géraldine
  • RILLAERS, Alexandra

We analyze the impact of a drop in fertility on the optimal allocation of resources in an overlapping generations economy where old workers care about leisure. We also characterize optimal dynamics and study the decentralization of the optimum by means of inter-generational transfers and/or public debt. We conclude that the policy recommendations of postponing retirement is fragile and depend on preferences and technologies. Also, even when the optimal adjustment of public debt goes into the expected direction in the long run-i.e., public debt should decrease-this may not be the case during the transition. Copyright 2004 Blackwell Publishing Inc..

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File URL: http://dx.doi.org/10.1111/j.1467-9779.2004.00183.x
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number 1741.

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Handle: RePEc:cor:louvrp:1741
Note: In : Journal of Public Economic Theory, 6(4), 607-636, 2004
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  1. Hu, Sheng Cheng, 1979. "Social Security, the Supply of Labor, and Capital Accumulation," American Economic Review, American Economic Association, vol. 69(3), pages 274-83, June.
  2. Deardorff, Alan V, 1976. "The Optimum Growth Rate for Population: Comment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(2), pages 510-15, June.
  3. Alan J. Auerbach & Laurence J. Kotlikoff & Robert P. Hagemann & Giuseppe Nicoletti, 1989. "The Economic Dynamics of an Ageing Population: The Case of Four OECD Countries," OECD Economics Department Working Papers 62, OECD Publishing.
  4. MICHEL, Philippe & PESTIEAU, Pierre, 1999. "Social security and early retirement in an overlapping-generations growth model," CORE Discussion Papers 1999051, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. repec:fth:harver:1490 is not listed on IDEAS
  6. Marchand, Maurice & Michel, Philippe & Pestieau, Pierre, 1996. "Intergenerational transfers in an endogenous growth model with fertility changes," European Journal of Political Economy, Elsevier, vol. 12(1), pages 33-48, April.
  7. Blanchet, Didier & Kessler, Denis, 1991. "Optimal Pension Funding with Demographic Instability and Endogenous Returns on Investment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 4(2), pages 137-54, May.
  8. Atkinson, A B & Sandmo, A, 1980. "Welfare Implications of the Taxation of Savings," Economic Journal, Royal Economic Society, vol. 90(359), pages 529-49, September.
  9. Miles, David, 1999. "Modelling the Impact of Demographic Change upon the Economy," Economic Journal, Royal Economic Society, vol. 109(452), pages 1-36, January.
  10. David M. Cutler & James M. Poterba & Louise M. Sheiner & Lawrence H. Summers, 1990. "An Aging Society: Opportunity or Challenge?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 1-74.
  11. Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
  12. Peters, Wolfgang, 1991. "Public Pensions in Transition: An Optimal Policy Path," Journal of Population Economics, Springer;European Society for Population Economics, vol. 4(2), pages 155-75, May.
  13. Meijdam, A.C. & Verbon, H.A.A., 1997. "Aging and public pensions in an overlapping-generations model," Other publications TiSEM b93c8773-5708-434f-8386-6, Tilburg University, School of Economics and Management.
  14. Michel, Philippe, 1990. "Some Clarifications on the Transversality Condition," Econometrica, Econometric Society, vol. 58(3), pages 705-23, May.
  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. Laurence J. Kotlikoff, 1998. "Simulating the Privatization of Social Security in General Equilibrium," NBER Chapters, in: Privatizing Social Security, pages 265-311 National Bureau of Economic Research, Inc.
  17. repec:cup:macdyn:v:1:y:1997:i:1:p:7-44 is not listed on IDEAS
  18. Bertrand Crettez & Patricia Le Maitre, 2002. "Optimal age of retirement and population growth," Journal of Population Economics, Springer;European Society for Population Economics, vol. 15(4), pages 737-755.
  19. HUANG, HE & IMROHOROG[caron]LU, SELAHATTIN & SARGENT, THOMAS J., 1997. "Two Computations To Fund Social Security," Macroeconomic Dynamics, Cambridge University Press, vol. 1(01), pages 7-44, January.
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