The Intergenerational State: Education and Pensions
When credit markets to finance investment in the human capital of young people are missing, the competitive equilibrium allocation is inefficient. When generations overlap, this failure can be mitigated by properly designed social institutions such as public education and public pensions. We show that, when established jointly, they implement an intergenerational transfer scheme supporting the complete market allocation. Through the public financing of education, the young borrow, from the middle age to invest in human capital. When employed, they pay back their debt via a social security tax, the proceedings of which finance pension payments to the now elderly lenders. We consider other, allocationally equivalent, financing schemes. In all cases, when the complete market allocation is achieved a certain equality should be observed among implicit rates of return and the market rate of return. We test this prediction by using micro and macro data from Spain. The results are, surprisingly, good. We also use the model to quantify the impact of undergoing demographic change on the implicit rates of return. The results point, unsurprisingly, to dramatic changes in generational rates of return. Contrary to what predicted by earlier studies in the generational accounting tradition, our findings suggest that future generations are not necessarily going to be worse than current ones.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Mar 2002|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert C. Merton, 1981. "On the Role of Social Security as a Means for Efficient Risk-Bearing in an Economy Where Human Capital Is Not Tradeable," NBER Working Papers 0743, National Bureau of Economic Research, Inc.
- Cremer, Helmuth & Kessler, Denis & Pestieau, Pierre, 1992.
"Intergenerational transfers within the family,"
European Economic Review,
Elsevier, vol. 36(1), pages 1-16, January.
- CREMER, Helmuth & KESSLER, Denis & PESTIEAU, Pierre, "undated". "Intergenerational transfers within the family," CORE Discussion Papers RP 970, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cremer, H. & Kessler, D. & Pestieau, P., 1989. "Intergenerational Transfers Within The Family," CORE Discussion Papers 1989018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Kehoe, Timothy J & Levine, David K, 2001. "Liquidity Constrained Markets versus Debt Constrained Markets," Econometrica, Econometric Society, vol. 69(3), pages 575-598, May.
- Cass, David, 1972. "Distinguishing inefficient competitive growth paths: A note on capital overaccumulation and rapidly diminishing future value of consumption in a fairly general model of capitalistic production," Journal of Economic Theory, Elsevier, vol. 4(2), pages 224-240, April.
- Kotlikoff, Laurence J & Spivak, Avia, 1981. "The Family as an Incomplete Annuities Market," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 372-391, April.
- Laurence J. Kotlikoff & Avia Spivak, 1979. "The Family as an Incomplete Annuities Market," NBER Working Papers 0362, National Bureau of Economic Research, Inc.
- Laurence J. Kotlikoff & Avia Spivak, 1979. "The Family as an Incomplete Annuities Market," UCLA Economics Working Papers 151, UCLA Department of Economics.
- Antonio Rangel, 1999. "Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange," Working Papers 00001, Stanford University, Department of Economics.
- Antonio Rangel, 2000. "Forward and Backward Intergenerational Goods: A Theory of Intergenerational Exchange," NBER Working Papers 7518, National Bureau of Economic Research, Inc.
- Boldrin, Michele, 2005. "Public education and capital accumulation," Research in Economics, Elsevier, vol. 59(2), pages 85-109, June.
- Michele Boldrin, 1992. "Public Education and Capital Accumulation," Discussion Papers 1017, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Michele Boldrin, 2005. "Public Education and Capital Accumulation," Levine's Bibliography 172782000000000090, UCLA Department of Economics.
- Michele Boldrin, 1993. "Public Education and Capital Accumulation," Working Papers 9301, Centro de Investigacion Economica, ITAM.
- Barro, Robert J & Becker, Gary S, 1989. "Fertility Choice in a Model of Economic Growth," Econometrica, Econometric Society, vol. 57(2), pages 481-501, March.
- Robert J. Barro & Gary S. Becker, "undated". "Fertility Choice in a Model of Economic Growth," University of Chicago - Population Research Center 88-8, Chicago - Population Research Center.
- Barro, R.J. & Becker, G.S., 1988. "Fertility Choice In A Model Of Economic Growth," University of Chicago - Economics Research Center 88-8, Chicago - Economics Research Center.
- Giorgio Bellettini & Carlotta Berti Ceroni, 1999. "Is Social Security Really Bad for Growth?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 796-819, October.
- 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.
- Gary S. Becker & Kevin M. Murphy, "undated". "The Family and the State," University of Chicago - Population Research Center 87-15, Chicago - Population Research Center.
- Neher, Philip A, 1971. "Peasants, Procreation, and Pensions," American Economic Review, American Economic Association, vol. 61(3), pages 380-389, June.
- Ana Montes, 2002. "Educación para los jóvenes y pensiones para los mayores: ¿Existe alguna relación? Evidencia para España," Investigaciones Economicas, Fundación SEPI, vol. 26(1), pages 145-185, January.
- Laurence J. Kotlikoff & Torsten Persson & Lars E.O. Svensson, 1986. "Laws as Assets: A Possible Solution to the Time Consistency Problem," NBER Working Papers 2068, National Bureau of Economic Research, Inc.
- 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.
- Alan J. Auerbach & Laurence J. Kotlikoff & Willi Leibfritz, 1999. "Generational Accounting around the World," NBER Books, National Bureau of Economic Research, Inc, number auer99-1, April.
- Michele Boldrin & Aldo Rustichini, 2000. "Political Equilibria with Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 41-78, January.
- Kotlikoff, Laurence J & Persson, Torsten & Svensson, Lars E O, 1988. "Social Contracts as Assets: A Possible Solution to the Time-Consistency Problem," American Economic Review, American Economic Association, vol. 78(4), pages 662-677, September. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:3275. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.